Managing retirement plans for internationally mobile employees

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AEGON Global Pensions on how companies can provide the appropriate retirement plans for their key expatriate workers.

Companies spend time and money trying to attract and retain their key expatriate personnel. Providing these high value employees with appropriate benefits is important - but not always easy. How - and why - should companies provide retirement savings for these valuable workers?

High quality, internationally mobile employees are hard to find - and good employee benefits can provide a useful and cost-effective tool for recruiting and retaining these high value employees. By creating a global strategy with appropriate professional advice, it is possible to develop a multi-tiered pension system that will help your company take care of some of its most valuable employees. 

Better global governance leads automatically to a more explicit expat policy

Over the past ten years, multinational companies have increasingly created clear policies on how to take care of their internationally mobile employees. The challenge has been to take good care of expat employees without excessively driving up costs (although it helps that the group of expat employees concerned only represent a small percentage of the workforce as a whole, so cost is not usually the most important factor).

A good pension policy lays out a clear strategy for the whole company and makes clear distinctions between different groups of employees. In this way, companies can distinguish between genuine highly mobile international employees or ‘global nomads' and those employees who can be included into local pension plans.

Most employers distinguish between short-term assignments, permanent moves and mobile international assignments (‘global nomads'). Short-term assignees tend to remain in their home-country pension plan, and long-term assignees tend to use their host country pension plan. ‘Global nomads' typically require an international retirement plan.

Local plans are often a preferable option as - where possible - there are usually fiscal benefits attached that reduce the costs. However there are situations where local solutions are not possible (or will provide too little value for the expat concerned) and an appropriate alternative has to be found.

Providing pensions to highly mobile employees

If local pension provision is not a suitable option for a particular employee, companies can choose from a number of solutions. These include using a book-reserved pension - or an unfunded promise - on the company's books, or providing a simple cash pay-out to the employee concerned. A better solution, however, is to fund the pensions through an offshore insurer. This approach offers more security and transparency to both employers and to the employee.

Many companies also look for solutions with fewer tax constraints (or simply lower tax rates) that also fall within European Union legislation and control authorities. In order to avoid harming relationships with home country fiscal authorities, multinational organisations are increasingly opting for Luxembourg, as it is typically seen in a better light than perceived tax havens elsewhere.  

Highly flexible, international retirement plans

Retirement plans for internationally mobile employees need to be flexible, easy to understand (and use) and transparent. Internationally mobile employees typically work in several countries before retiring, and their salaries may also be paid in different currencies at different times. When choosing an appropriate insurer for such an expat retirement solution, therefore, it is important to choose one with experience in this niche market.

In order to meet the needs of expatriate employees and their employers, AEGON Global Pensions and La Mondiale Europartner have developed the International Retirement Plan. This solution has been designed to be highly flexible and easy to implement, regardless of where people work, live or wish to retire.

AEGON Global Pensions is able to assist internationally operating companies with a multilingual, multicurrency pension policy for its international employees provided from Luxembourg (either directly with a company or through a trust.) In addition, we can also help with other employee benefits needs, such as death, disability and medical benefits.

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