Employers increasingly recognise the importance of a global approach to retirement strategy – but there are key areas where they are falling short. Here are the steps to improve your global DC governance for better oversight, compliance, and workforce outcomes.
By Helen Hatt, Partner in International Wealth at Aon
Defined contribution (DC) pension plans are now a mainstay of the global retirement landscape, with more assets globally invested in DC plans than defined benefit (DB) arrangements, and for multinationals, managing the complexities across jurisdictions is an enormous task.
Employers have embraced a global approach to retirement strategy, aiming to ensure plans meet the needs of specific countries while aligning with broader corporate goals. Aon’s Global Retirement Management Survey (2024) found 84 percent of respondents have a centralised benefits philosophy.
However, even with this global approach, there is potential to fall short. Without proper visibility and strategic oversight, organisations risk offering benefits that do not meet workers’ expectations, neglect local compliance requirements, or conflict with their goals. When plans go unchecked for long periods, especially the smaller, less material plans, these risks may even be unknown.
There are several areas to consider when introducing or improving a global retirement strategy to ensure DC plans are compliant, competitive, and well managed.
Why Employers Need Global Oversight
Retirement benefits are crucial for employers’ strategies, influencing budgets, talent attraction and retention, and workforce planning. They are also a significant employment cost, and it is important to ensure these funds are well spent.
A global approach to retirement benefits can improve consistency across regions, aligning plans with local and global needs. Investment strategy and fees become more visible, helping employers focus on achieving better member outcomes and accessing economies of scale.
In a world where corporate values increasingly drive global initiatives, a global strategy and delivery framework will support the swift rollout of these initiatives to ensure that benefits play their part in developing organisational culture.
Some employers rely on local expertise to understand a specific benefits landscape, but even here there are benefits of global visibility. Head office leaders may choose not to intervene in local plans as long as they receive adequate information and are confident that plans are well looked after.
Where Organisations are Falling Short
While a global approach is best practice, there are several common shortfalls.
- Lack of visibility. Many organisations continue to have limited insight into their retirement plans globally. Opportunities to capitalise on global scale can be missed as employers often struggle to confirm the level of DC assets they oversee, or the annual spend on contributions.
- Skills gaps. A shortage of in-house retirement expertise means management and compliance are often reactive rather than proactive. Consultants can be a lifeline for stretched internal teams.
- Inefficient governance. An unstructured approach to global benefits can cause gaps in compliance, governance, and risk management. Smaller plans, in particular, are neglected – Aon found 28 percent of employers have never reviewed the investment performance of their smaller plans.
- Poor data management. Many organisations struggle with incomplete or outdated information about their DC plans. Without data that is well organised and maintained, decision-making is compromised and opportunities to reduce cost and risk could be missed.
Steps to Improve Global DC Governance
To overcome these challenges, organisations should take a structured approach to global DC governance. Here are the key steps:
Set the strategy: Define a global benefits strategy that can be applied globally while still accommodating local differences.
Collect data: Introduce tools to enable simple access to key information on all DC plans, with processes to ensure information is regularly updated.
Assess and prioritise plans: Identify opportunities to optimise plans, prioritising high-risk and high-impact tasks.
Establish ongoing monitoring: Schedule regular plan reviews to ensure ongoing compliance and alignment with the strategy. Again, high-risk and high-impact regions may be reviewed most frequently.
Invest in expertise: Consider where internal staff may benefit from specialist support and extra resources to ensure the strategy runs smoothly. Where skills are short, consultants can step in to assist with every step.
Insights for Innovation
When global governance works well, employers gain insight into the strengths and weaknesses of their retirement plans, ensuring alignment with corporate goals and getting a comprehensive understanding of risk.
This approach also unlocks opportunities for innovation. Employers can use these insights to align pension plans with other global goals, such as retirement adequacy or sustainability targets.
By embracing a structured, global approach to retirement, organisations can provide for their workforces while enhancing the performance, competitiveness, and appreciation of the benefits they offer.
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