Sovereign country debt defaults plus a desire by employers to improve the benefits packages of expats and foreign workers on local contracts has seen a huge rise in international pensions, according to a new report.
Willis Towers Watson’s International pension plan survey reported a 6% rise in the number of International Pension Plans (IPPs) and International Savings Plans (ISPs) in 2020 compared to 2019.
It revealed assets under management of IPPs and ISPs rose from US$15.8 billion in 2019 to US$17.2bn in 2020, with there also being a 13% rise in the number of IPPs being offered as a safer option for local populations in challenging economic locations.
Michael Brough, senior director in Willis Towers Watson’s global services and solutions group, said: “This research clearly shows these flexible, cross-border schemes are continuing to strengthen their position in the market.
“With many large multinationals, charities, and international governmental organisations finding it challenging to offer good savings and pensions benefits to their global staff, we expect this trend to continue into 2021.”
But he also added the growth in international pensions was accelerated in 2020 due to higher numbers of sovereign states defaulting on their government debt, making companies wary of putting their money into pensions that might fail.
“Employers want to find a safer harbour for workers in these high-risk environments, by using cross-border plans to access global funds in hard currencies,” he said.
The survey further found IPPs and ISPs were more flexible in adapting to financial pressures. The report noted that many schemes had amended their governing trust deeds or contracts to allow hardship withdrawals, while others had changed employer or employee contributions as a form of short-term relief.
The study also revealed that the most common minimum and maximum employer contribution rates were between 5% and 9%.
For the vast majority of IPPs and ISPs, employees were not required to contribute. Around 20% of IPPs also offer some form of income drawdown.