International
Pension Plan (IPP)

For one-off or occasional short-term secondments, the employee usually remains in their home country's company pension plan. In the case of a long-term secondment to a foreign subsidiary, the employee usually switches to that company's pension plan. It becomes complicated for a "nomad" who is sent multiple times to subsidiaries in different countries. For such an employee, remaining in the home country's pension plan or switching—non-permanently—to the host country's pension plan usually makes no sense for economic or tax reasons. For such an employee, an international pension plan would certainly be a very good way to continuously earn company pension entitlements without these entitlements arising from a multitude of different pension plans.

Moreover, multinational companies often lack local pension plans in individual, usually smaller, foreign subsidiaries. Implementing individual pension plans optimized for the legal requirements of each country is usually very time-consuming and lacks transparency. Cross-border coordination of different pension plans is only possible with great effort.

An International Pension Plan (IPP) is usually defined-contribution (savings plan) due to its high level of transparency, efficiency, and low complexity, but it can also be defined-benefit or hybrid (e.g., defined-contribution with a minimum interest guarantee). Furthermore, existing company pension entitlements and differences in statutory pension insurance can be taken into account if necessary. The more countries involved, the more complex the establishment of an IPP can become, especially if local standards must also be observed.

In most cases, an IPP is established neither in the country of secondment (or the employer's headquarters) nor in the host country, but rather in a major international financial center, such as the Channel Islands.

Saving for employee pension entitlements usually takes place in licensed, privately organized trust funds. The laws of the country in which the IPP was established apply to the asset management of the outsourced pension obligations.

To take advantage of tax benefits for employees, IPPs are—where possible—combined with pension plans under the IORP Directive for IORPs (Institutions for Occupational Retirement Provision). This defers the taxation of employer contributions and investment returns until the time of pension payout. With a classic IPP, employer contributions are generally taxed immediately as a component of salary.

EU Directive 2016/2341 (the IORP II Directive) on the activities and supervision of institutions for occupational retirement provision was published in the Official Journal of the European Union on December 23, 2016. The IORP II Directive replaces EU Directive 2003/41 and aims, among other things, to improve the framework for employee mobility between member states and to provide the best possible protection for their pension entitlements. This is to be achieved through minimum harmonization of occupational pension systems, facilitating cross-border activities for IORPs, and clarifying the relevant procedures for the (partial) transfer of pension schemes to other member states under certain conditions (approval by the competent authority of the home member state of the receiving IORP following prior consent from the authority of the transferring IORP, as well as the consent of the majority of beneficiaries or their representatives, such as the works council). However, this should not affect the national social and labor law provisions of the host member state.

Many measures required by the EU IORP II Directive have already been successfully implemented by pension funds in Austria. This includes minimum supervisory standards, risk management (risk assumption, asset-liability management, reinsurance, etc.), disclosure obligations toward pension scheme members and beneficiaries, and internal control systems. However, there are still no uniform quantitative capital requirements or risk-based corporate governance standards at the EU level for IORPs, such as those contained in the Solvency II three-pillar model for insurance companies.

EU Directive 2023/2864 establishes a European Single Access Point (ESAP), through which member states must provide information relevant to financial services, capital markets, and sustainability starting January 10, 2030.

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