Navigating global pension systems presents a significant challenge for employers with international operations. Each country maintains unique requirements for retirement benefits, whether mandatory or supplemental. These requirements directly impact talent strategies and compliance obligations for organizations expanding across borders.
The right type of pension plan is a powerful tool for attracting and retaining talent while ensuring regulatory compliance in multiple jurisdictions. Different pension structures provide varying levels of flexibility, cost control, and benefit security. These factors become critical considerations when building and maintaining a global workforce.
In this post, we examine six primary types of pension plans that global employers should consider when compensating international talent competitively and compliantly.
1. Statutory (Mandatory) Pension Plans
Statutory pension plans form the foundation of retirement benefits in most countries. These government-mandated systems require employers to contribute a portion of employee earnings to public retirement funds.
Examples include the United Kingdom’s National Insurance, which funds state pensions alongside healthcare, and the Central Provident Fund (CPF) in Singapore, a savings scheme covering retirement, healthcare, and housing. In the U.S., employers and employees jointly fund Social Security, while India’s National Pension System (NPS) allows voluntary top-ups to mandatory contributions. These plans are non-negotiable for employers operating within a country’s borders.
Contribution structures and benefits vary widely. For instance, the U.S. Social Security deducts 6.2% from both employers and employees, whereas Singapore’s CPF requires up to 17% from employers and 20% from employees (below 55 years of age). Some systems, such as Brazil’s INSS, cap contributions at specific salary thresholds.
These variations directly impact payroll budgeting and compensation benchmarking for global teams. Employers must also navigate differences in benefit structures—some plans offer defined payouts based on lifetime earnings, while others function as individual savings accounts.
For multinational organizations, statutory pension plans represent both a compliance baseline and a competitive consideration. While employers cannot opt out, understanding local frameworks ensures accurate cost forecasting and prevents penalties. Aligning mandatory contributions with voluntary benefits, such as private pensions, helps create cohesive compensation packages that meet diverse workforce expectations.
2. Defined benefit (DB) pension plans
Defined benefit pension plans provide retirees with predetermined payouts based on salary history and tenure. Employers fund these plans and assume full responsibility for the investment and longevity risk. Unlike statutory employee benefits, DB pension plans represent voluntary commitments by organizations to enhance retirement security.
DB plans offer employers a strategic retention tool by tying pension value to the length of service. However, they require complex actuarial management to address funding gaps caused by market downturns or increasing lifespans. Common structures include final salary plans, where benefits are based on earnings near retirement, and career average schemes, which calculate payouts using an individual’s lifetime earnings.
These types of pension plans remain prevalent in Europe’s public sectors and legacy corporate systems. The Netherlands’ ABP and Sweden’s AP funds exemplify large-scale DB systems, with the former covering 3 million government employees. In the U.S., DB plans still dominate public education and municipal workforces. Employers in unionized industries, such as automotive manufacturing in Germany, often retain DB plans to honor collective bargaining agreements.
3. Defined contribution (DC) pension plans
Defined contribution pension plans shift the responsibility for retirement savings to employees while offering employers predictable funding obligations. These plans require fixed contributions from employers, employees, or both, with benefits determined by investment performance and contribution levels over time.
Examples include the 401(k) in the U.S., where 44% of private-sector workers participate, and the U.K.’s Stakeholder Pensions, which mandate default investment funds to simplify participation for undecided employees. Canada’s Group RRSPs similarly allow tax-deferred savings with employer-matched contributions.
Globally, DC plans dominate employer-sponsored retirement systems due to their cost stability for organizations. In the U.K., DC assets are projected to reach £1,680 billion by 2030, overtaking defined benefit schemes. Australia’s Superannuation Guarantee requires employers to contribute 11% of wages to DC accounts, while Singapore’s CPF includes a DC-like structure with mandatory savings rates.
Employers favor these plans for insulating balance sheets from market volatility—unlike DB plans, DC schemes transfer investment and longevity risks entirely to employees. For employers, DC plans reduce administrative complexity compared to DB systems. Fixed contribution rates simplify budgeting, particularly in multinational settings where varying statutory pensions already complicate payroll.
Yet, the lack of guaranteed retirement income may weaken retention—a trade-off mitigated by hybrid models in markets like the Netherlands, where collective DC plans pool risks across generations. As DC adoption grows, innovations such as target-date funds and fee transparency initiatives aim to strike a balance between employee security and employer cost controls.
4. Group personal pension (GPP) plans
Group personal pension plans combine individual retirement accounts with collective employer oversight, offering a middle ground between mandatory systems and fully customizable solutions. Employers partner with insurers or asset managers to provide employees with personal pension accounts within a unified framework.
The U.K.’s Workplace Pension auto-enrollment system, which covers 88% of eligible workers, predominantly uses GPPs administered by providers like Aviva and Legal & General. Ireland’s PRSAs and Germany’s bAV plans follow similar structures, allowing portable retirement savings with optional employer contributions.
These plans thrive in markets prioritizing individual autonomy. In the U.K., a vast majority of SMEs use GPPs due to their plug-and-play compatibility with auto-enrollment rules. Employers contribute a minimum of 3% of qualifying earnings while outsourcing investment management and regulatory reporting to providers. Australia’s Retirement Savings Accounts (RSAs)—though technically DC plans—function like GPPs by enabling employer-selected fund managers to handle member-directed investments.
For global employers, GPPs offer strategic flexibility. Contribution rates can scale with business size or regional norms—a critical feature for firms balancing varied statutory requirements across markets. Unlike DB plans, GPPs avoid long-term liability risks, yet they provide stronger retention incentives than pure DC schemes through employer matching.
5. International or cross-border pension plans
International pension plans address the complexities of retirement savings for employees who work across multiple jurisdictions or lack long-term ties to a single country’s system. These plans, such as International Group Pension Plans (IGPPs) or offshore structures in jurisdictions like Gibraltar or the Isle of Man, enable contributions from both employers and employees while navigating diverse tax regimes.
Key features include multi-currency investment options and compliance with cross-border regulations. For example, IGPPs consolidate contributions from branches in Germany, Japan, and Brazil into a single plan governed by the EU’s IORP II Directive. Offshore pensions in the Cayman Islands may provide tax-deferred growth for executives on rotational assignments.
Such plans often integrate with global payroll systems, simplifying administration for employers with teams in 10+ countries. Compliance frameworks, such as the Common Reporting Standard (CRS), ensure adherence to international tax transparency rules.
For employers, these plans enhance competitiveness in talent markets reliant on mobility. They also mitigate the risk of double contributions—critical in regions like the Gulf Cooperation Council, where expatriate employees comprise over 70% of the workforce. However, currency volatility and shifting tax treaties require active management.
While offering centralized control, international plans demand rigorous legal oversight. Misalignment with local mandatory schemes can trigger penalties. Hybrid models, such as topping up statutory contributions with portable offshore accounts, strike a balance between compliance and employee retention goals. As remote work expands, these plans are evolving to cover digital nomads through partnerships with fintech platforms like Wise and Revolut.
6. Supplemental pension plans or voluntary retirement savings
Supplemental pension plans enable employers to enhance statutory retirement benefits through voluntary contributions, addressing gaps in public systems. These schemes operate alongside mandatory frameworks, often forming part of a country’s second pillar (employer-sponsored) or third pillar (individual savings).
France’s AGIRC-ARRCO combines industry-wide plans that cover most private-sector workers. India’s Voluntary Provident Fund (VPF) allows employees to contribute up to 100% of their salary beyond the mandatory limits. In the EU, Occupational Pensions under the Pan-European Personal Pension Product (PEPP) regulation permit cross-border portability for mobile professionals.
These plans often include tax incentives to drive participation. For example, France’s PERCO offers tax-deferred growth on employer-matched contributions, and Ireland’s PRSA grants income tax relief on contributions up to 40% of earnings, depending on age. Behavioral strategies like automatic enrollment—shown to boost participation by 60% in the initial years—complement financial incentives.
However, engagement remains uneven: 35% of German bAV plan participants opt for conservative investment strategies, potentially limiting long-term growth. Employers mitigate this through financial wellness programs, such as Sweden’s annual pension statement initiative, which improved contribution rates by 18% among low-income workers.
Globally, supplemental plans help employers differentiate their value proposition in competitive talent markets. Multinationals leverage these plans to unify benefits across regions.
Choosing the right pension plan type for your global team
Selecting appropriate pension plans for a global workforce requires balancing multiple factors. Local regulatory requirements vary significantly across jurisdictions, with each country maintaining unique contribution limits, tax treatments, and withdrawal rules that directly impact plan design and implementation. Employee expectations also differ by region—while retirement benefits in some countries focus on defined contribution plans, others may emphasize supplemental options or portable solutions for mobile workers.
Workforce composition significantly influences pension strategy. For expatriates and internationally mobile employees who often can’t participate in host country plans or accrue meaningful benefits during shorter assignments, International Pension Plans (IPPs) provide valuable solutions.
Meanwhile, local employees in countries with economic instability may benefit from different approaches, such as supplemental plans that enhance statutory minimums. Many organizations implement a hybrid approach—maintaining core global standards while adapting to local requirements through partnerships with Global Employer of Record (EOR) services that manage compliance across multiple jurisdictions.
Velocity Global’s International Pensions solution offers flexible retirement benefits across 185+ countries, helping employers attract and retain top global talent while ensuring compliance with local regulations. Their Global Work Platform™ simplifies the administration of pension plans for distributed teams, allowing organizations to provide competitive retirement benefits that nearly half of global workers consider a significant factor in their employment decisions. Contact us for more info.
Topic:
Employee Benefits
