33 new international pension plans established in 2012

Thirty three new international pension plans (IPPs) were established in 2012, according to research by consultancy Towers Watson.

Its annual International pension plan survey, found the total number of international plans managed by 391 responding employers now totals 403.

The survey also found that international pension plans are being developed within multi-country pension frameworks, including pan-European structures or institutions for occupational retirement provision (IORPs).

Organisations are using creative ways to include multiple groups into a single pension structure. This approach can be advantageous for employers which streamlined their schemes using a single administrator, a single investment platform, and a single governance framework.

The survey also identified the development of member decision-making tools and the adoption of smartphone technologies.

Funded defined contribution (DC) plans remain the most prevalent design for IPPs. Some defined benefit (DB) plans are still in operation but these typically closed to new members. However, the research found that one new DB plan was set up in 2012.

The survey also found:

  • 40% of IPPs offered up to ten investment funds in 2012.
  • 60% offered in excess of ten investment options.
  • 40% of IPPs now offer lifestyle options.
  • More than 20% of respondents offered more than one lifestyle option.
  • Nearly 60% of IPPs offer lump sum benefits for retirees.

Michael Brough, senior consultant at Towers Watson, said: “IPPs are proving to be a good way for multinational companies to provide their employees with access to low-cost savings arrangements, particularly for those that might struggle to find good individual alternatives, especially in countries with immature investment markets.

“The growth of the IPP market is mainly driven by more companies offering IPPs for international or expatriate employees to either top up or replace home country retirement plans.

“We also see more multinationals extending the eligibility of existing IPPs to allow local workforces to join the IPP, where possible. This illustrates the continuing trend for these vehicles to be set up where local alternative arrangements are inadequate or absent.”