London, 29 July, 2013 – Aon Hewitt, the global talent, retirement and health solutions business of Aon plc (NYSE: AON), is calling for the European Commission to address the issue of past service benefits and avoid making unnecessary changes to the existing rules on cross-border pensions.  The proposed new legislation on institutions for occupational retirement provision (IORPs) is due out this Autumn.

Aon Hewitt which has worked with several companies on developing cross-border pensions, recently took a group of representatives from major multinational companies to the EC to share their own experiences of cross-border arrangements and to discuss potential changes to the directive.

Paul Bonser, partner and leader of Aon Hewitt's UK International Retirement Practice, said:
"We believe the existing IORP directive functions very well from a cross-border pensions perspective.  And that's not just our belief, it's the experience of our multinational clients who have implemented or are implementing cross-border pension funds. We think the regulators in different countries generally cooperate effectively and facilitate cross border activity.

"The existing directive works well for enabling arrangements for future service.  Where it is less satisfactory – and where we would like some change – is in enabling the way past service benefits from previous pension arrangements are consolidated.  This is a key element for increasing the popularity and effectiveness of cross-border arrangements – with all the economies of scale and improved governance that they can bring.

Paul Bonser continued:
"Paramount in our view, is that the legislation should facilitate the cross-border consolidation of assets and liabilities.  A key part of the process of establishing a cross-border pension fund is the winding-up of existing local pension funds/insurance contracts and consolidating those assets and past service liabilities in the cross-border vehicle.  Failure to do so leads to increased operational costs, governance and an inability to benefit from economies of scale.  While some regulators already apply the spirit of the Pensions Directive to cross-border asset transfers, others are taking a more protectionist approach.

Aon Hewitt has noticed renewed interest in cross-border arrangements from multinationals over the last 12 months.

Paul Bonser said:
"In our experience, most of the barriers to cross-border arrangements are perceived rather than actual.  Social and labour law are often cited but they become non-issues if you are simply 'lifting and shifting' an existing benefit promise into a different financing vehicle, established in another European Economic Area country.

"This, in practice, is what most of our multinational clients have done.  They didn't set up a single plan with a single set of benefits for all countries; instead they use the cross-border plan to provide existing benefits for some countries more efficiently and with improved governance.

"We don't believe that this is time to tinker with the existing regulations. Other than addressing asset transfers, the most influential action that the EC should take is to communicate more effectively that the cross-border process does work in practice – using existing cases as positive examples – and that it is not obstructed by insurmountable barriers."

Media Contacts:    
Colin Mayes                                              Giles Abbott
 Aon Hewitt                                                Capital MSL
 01372 733689                                           020 7307 5340
colin.mayes@aonhewitt.com                       giles.abbott@capitalmsl.com
 

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About Aon Hewitt
Aon Hewitt empowers organisations and individuals to secure a better future through innovative talent, retirement and health solutions. We advise, design and execute a wide range of solutions that enable clients to cultivate talent to drive organisational and personal performance and growth, navigate retirement risk while providing new levels of financial security, and redefine health solutions for greater choice, affordability and wellness.  Aon Hewitt is the global leader in human resource solutions, with over 30,000 professionals in 90 countries serving more than 20,000 clients worldwide.  For more information on Aon Hewitt, please visit www.aonhewitt.com.

About Aon
Aon plc (NYSE: AON) is the leading global provider of risk management, insurance and reinsurance brokerage, and human resources solutions and outsourcing services. Through its more than 61,000 colleagues worldwide, Aon unites to empower results for clients in over 120 countries via innovative and effective risk and people solutions and through industry-leading global resources and technical expertise. Aon has been named repeatedly as the world's best broker, best insurance intermediary, reinsurance intermediary, captives manager and best employee benefits consulting firm by multiple industry sources. Visit www.aon.com for more information on Aon and www.aon.com/manchesterunited to learn about Aon's global partnership and shirt sponsorship with Manchester United.