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Global nomads and economic volatility push record growth in international pensions and savings plans


March 9, 2018

A record number of International Pension and Savings Plans were set up last year, as employers strive to meet the savings needs of a global workforce.

LONDON, 8 March, 2018 — A record number of International Pension and Savings Plans (IPPs and ISPs) were set up last year, as employers strive to meet the savings needs of a global workforce, and to help staff in hotspots of economic and political instability.

Willis Towers Watson (NASDAQ:WLTW), revealed in its latest International Pension Plan Survey that 43 IPPs and ISPs were established in 2017, which is a record in a survey dating back to 2008, and far higher than in recent years (16 in 2016, 23 in 2015).

IPPs and ISPs supplement or complement the usual national systems and typically have a global or regional membership. They were originally aimed at the traditional ‘expat’ - usually a senior executive or specialist - but their usage is expanding as employers offer them to other employee groups, including:

  • Expatriates excluded from, or who will not obtain a benefit from, home and/or local systems
  • Local workers in the Middle East (GCC and beyond)
  • Local staff in countries that are economically unstable, or perhaps where no local pension system exists
  • Executives capped by local plans

Michael Brough, Senior Director in Willis Towers Watson’s Global Services and Solutions Group, said:

“Interest in these longer term pension and savings plans is very strong, and I expect it to remain high as employers try to attract and retain skilled workers and global nomads. Multinationals are also exploring these plans to support different groups of their international workforce.

“While they are still popular for senior expats, these plans are increasingly being used to support foreign workers in countries where the host system is off limits. Many find themselves locked out of the local pension systems, such as in nomad hubs like Singapore, or where they have to contribute but cannot get the local benefits, like in China.

“In some countries, local employees may find that the pension infrastructure is unreliable or simply doesn’t exist, and international plans can be a very effective option. They can safeguard employee assets and offer some protection from sharp currency falls or local corporate and government bond defaults. Many plans have been established to cover countries where there has been a high degree of economic instability in recent years, including Argentina, Egypt, Turkey, Venezuela and Ukraine.

“In the Middle East international plans have been popular because employees place a strong emphasis on retirement benefits. In many cases, the international plans are far superior to what is on offer locally.”

Commenting on the market in Europe, Michael Brough added:

“Another ging trend is that employers are accepting that the much sought after Pan-European Pension Plan (PEPP) or cross border Institution for Occupational Retirement Provision (IORP) remains a bit of a myth for now, with few, if any, realistically viable non-associated multi-employer vehicles on the market.

“We see clients coming to us having assessed the IORP market, requesting an IPP as a stopgap to accumulate seed money, whilst the non-associated multi-employer IORP market slowly develops. These assets will potentially be transferred into an IORP ‘World’ compartment at a later date to support better charges negotiations at cross-border IORP. However, the number of cross-border IORPS actually fell from 82 in 2015 to 73 according EIOPA’s latest report*.”

The Willis Towers Watson IPP Survey 2017 also found that:

  • IPPs/ISPs are offered by companies in over 20 business sectors, but particularly in banking and finance, oil and gas, and industrials
  • Assets under management for the funded plans covered in our survey are estimated to be up to US$13 billion
  • 58% have been established with a 'retirement objective' (IPPs), with 42% having a shorter-term 'savings objective' (ISPs)
  • The majority (62%) of plans have global coverage, with the rest restricted to different regions
  • In the majority of IPPs and ISPs, employee contributions are voluntary, or are not allowed. Nearly all plans are defined contribution in design

Michael Brough added: “IPPs and ISPs have become much more efficient in recent years. Better ‘bundled’ all services products have been developed out of increased scale of assets. And there is more competition offering a wider range of investment funds, enhanced administration services, and communications support in multiple languages and currencies utilising the latest technology.

“Charges have fallen greatly since they were first introduced and a good plan will have annual total costs of under 1%. This can fall further when supported by Willis Towers Watson, where we can provide access to institutional investment funds.”

About The Survey

The 2017 International Pension Plan Survey covers 870 plans sponsored by 818 companies. The Survey is an annual study of international pension plans (IPPs) and international savings plans (ISPs) conducted by Willis Towers Watson, and is in its tenth year. It examines specific plan design features and membership or eligibility criteria.

About Willis Towers Watson

Willis Towers Watson (NASDAQ: WLTW) is a leading global advisory, broking and solutions company that helps clients around the world turn risk into a path for growth. With roots dating to 1828, Willis Towers Watson has 40,000 employees serving more than 140 countries. We design and deliver solutions that manage risk, optimize benefits, cultivate talent, and expand the power of capital to protect and strengthen institutions and individuals. Our unique perspective allows us to see the critical intersections between talent, assets and ideas – the dynamic formula that drives business performance. Together, we unlock potential.

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