Most employers offering retirement plans to supplement government-sponsored pension systems now do so through defined contribution (DC) or hybrid approaches, according to a new global guide from Mercer.
Mercer's Introduction to Benefit Plans Around the World: A Guide for Multinational Employers was created to help global companies more effectively assess, compare and provide retirement as well as medical and other group benefits to their employees.
"Multinational and local-country employers face many pressures - such as an aging population, market volatility, and increased governance and accounting requirements - that are hastening the move to defined contribution and hybrid plans, said Giles Archibald, a Mercer international consultant based in New York.
"While DC and hybrid approaches have understandable appeal, their popularity may come at a cost, Mr. Archibald continued. "We anticipate some reassessment of their use as companies make more of an effort to truly understand the impact of these retirement plan designs on employee savings and retirement patterns.
Deborah Cooper, principal in Mercer's London office in the UK, observed, "Increased reliance on defined contribution arrangements will lead to more government intervention. This will in turn increase costs. Hybrid arrangements can balance the risks employees face by relying on investment markets in pure DC schemes, with the regulatory and financial pressures experienced by employers providing DB schemes .
Traditional defined benefit (DB) plans remain the predominant type of supplemental retirement plan in a number of countries, notably Japan, the Philippines, South Korea, Mexico, Venezuela, Finland, the Netherlands and Israel (see Table 1). Even among these countries, however, there is a strong trend toward covering newly hired employees through DC or hybrid arrangements.
Mercer's Introduction to Benefit Plans Around the World provides extensive information on the design and prevalence of retirement, medical, sickness, disability and death benefit plans provided by multinational and leading local companies in 47 countries. This single-source, comprehensive guide also provides information on each country's legislative, legal and regulatory climate.
Mercer's guide summarizes key global trends, by country, as companies:
- Move away from defined benefits
- Raise the retirement age
- Comply with new requirements for plan governance
- Introduce new types of benefit plans
- Grapple with rapidly rising medical costs
Additionally, it defines the mandatory retirement practices under local law and regulation, summarizes typical market practices, assesses the general pension environment, identifies opportunities and trends, and outlines recent and proposed legislation.
Mercer's new Introduction to Benefit Plans Around the World: A Guide for Multinational Employers contains a wealth of information on retirement and health and benefit plans collected from multinational and leading local employers in the 47 countries surveyed. It is available to Mercer's multinational clients at no charge. More information can be found online at www.mercer.com/bpaw .
