There is increased demand for international pensions and savings vehicles as larger employers look to optimise benefits packages across their global workforce.
WTW’s latest survey took an in-depth look at more than 1,000 international pension and savings plans. It found that a quarter of these were set in the last five years — indicating demand was going. In total the assets under management within these schemes topped $19.3bn — up 5 per cent from the previous year.
Around half of these international pension plans (IPPs) and international savings plans (ISPs) were set up for expatriate workers unable to stay in their ‘home’ country plans, who were also not entitled to pension or savings benefits in their ‘host’ country.
But the survey found that these plans are also addressing other savings issues: with one in eight (13 per cent) established to include and serve local employees, often in countries at risk of economic or political instability. This includes a relatively high number of plans set up Egypt, Argentina, Lebanon and Sri Lanka. The survey found these schemes are most likely to be used by companies in the financial services sector.
WTW senior director, integrated and global solutions, Michael Brough says: “Companies are facing skills shortages in many hotspots across the world and are redefining their employee experience and total benefits offer to stay competitive.
“Many multinationals, charities, and international governmental organisations are looking for ways to offer minimum yet sufficient levels of pensions and savings to their global staff.
“Expats are often excluded from joining local ‘host’ pension schemes, or it may be inadvisable for them to do so. And local staff in many countries may also have limited options, or any savings may face the risk of economic instability or local sovereign debt default. International plans are a flexible way for employers to offer these vital benefits in a secure and efficient way.”
He added that companies are looking at setting up IPP or ISP solutions that can meet and fix multiple pensions challenges within the business. These plans can serve various expat groups, such as foreign staff excluded from local plans like the Central Provident Fund in Singapore, or to reward executives subject to capped ‘home’ country benefits. In the Middle East and GCC these international plans can be used to fund mandatory gratuities.
“More recently these plans can help meet DEI objectives whereby plan sponsors are keen to be able to report that by including an IPP they are now able to offer access to a pension plan to all their global staff.
The WTW survey also found that:
- Of the 1 in 8 plans offered to local employees in countries facing more challenging political and economic circumstances, Egypt was the most popular location for such IPPs/ISPs. 32 plans included Egypt-based savers. Argentina-based employees were in 31 plans, Lebanon 28, Sri Lanka 16, and Ecuador 15.
- ESG considerations are an emerging focus for IPPs and ISPs, with 163 plans indicating that they reviewed the fund range in the past 12 months for ESG considerations, which includes diversity, equity and inclusion audits.
- 71 per cent of plans were established with a ‘retirement objective’ (IPPs), and 29 per cent have a shorter-term ‘savings objective’ (ISPs).
- Almost all (94 per cent) IPPs are defined contribution, with employer contribution rates typically ranging from 10 per cent to 14 per cent.
- IPPs/ISPs are offered by companies in all business sectors, but particularly in banking and finance, which accounted for 26 per cent of plan sponsors, followed by oil and gas (9 per cent), and consumer goods and retail (7 per cent).