Demand for ‘borderless’ pensions grows to help global nomads and workers in riskier economies

ARLINGTON, VA, February 17, 2021 — The popularity of international pensions and savings plans has continued to grow as employers seek to improve benefits for expatriate staff, foreign workers on local contract terms and those working in challenging economies, research from Willis Towers Watson (NASDAQ: WLTW), a leading global advisory, broking and solutions company, revealed today.

Its latest International Pension Plan Survey recorded 988 International Pension Plans (IPPs) and International Savings Plans (ISPs), marking an increase of 56 plans (6%) on the previous year. Assets under management of IPPs and ISPs in the survey rose from $15.8 billion in 2019 to $17.2 billion in 2020.

The results also showed a 13% increase in the number of IPPs being offered as a safer option for local populations in challenging economic locations, particularly those at risk of political and economic instability, currency devaluation or sovereign debt default.

IPPs and ISPs were originally aimed at expats, especially senior executive “global nomads” who were unable to stay in their home country arrangements or to join host country plans. In more recent years, the popularity of IPPs and ISPs has also been driven by the needs of local expats (e.g., foreigners employed under a local contract) and other diverse and often complex employee groups.

“Many large multinationals, charities and international governmental organizations find it challenging to offer good savings and pensions benefits to their global staff,” said Michael Brough, senior director in Willis Towers Watson’s Global Service and Solutions Group. “Local pension systems may be exposed to high economic insecurity, or they may not allow expats to join. These flexible cross-border plans are continuing to strengthen their position in the market, and we expect that to continue in 2021.

“Last year a much higher number of sovereign states defaulted on their government debt, including some, like Lebanon, for the first time. This can have implications for savings because of bond and currency rates, and local rules around holding local bonds in local pension and savings plans.

“It is likely more defaults will happen in 2021 as countries struggle to deal with the implications of the pandemic. We’ve seen an uptick in demand from companies that are wary of putting their staff into pensions that may fail. They often want to find a safer harbor for workers in these high-risk environments by using cross-border plans to access global funds in hard currencies.”

The survey also found that during the global pandemic IPPs and ISPs were highly flexible in adapting to financial pressures. Many plans amended their governing trust deed or contracts to allow hardship withdrawals, while others changed employer or employee contributions as a form of short-term relief. Some businesses asked that eligibility criteria be amended to allow more employees to join IPPs and ISPs where local options had become higher risk.

The Willis Towers Watson 2020 IPP Survey also found that:

• 70% of plans have been established with a “retirement objective” (IPPs), with 30% having a shorter-term “savings objective” (ISPs).
• Minimum and maximum employer contribution rates most commonly range between 5% and 9%. In the majority of IPPs and ISPs, employees are not required to contribute.
• IPPs and ISPs are offered by companies in all business sectors, but particularly in banking and finance, oil and gas, and consumer goods and retail. Over the past year there has been significant interest in intergovernmental organizations and nongovernmental organizations looking to set up new plans and review existing arrangements.
• IPPs and ISPs are offered to local employees in countries operating in challenging circumstances. Argentina was the most popular location for such IPPs and ISPs, with 34 plans including Argentina-based savers. Egypt-based savers were in 24 plans, Russia 19, Ukraine 15 and Turkey 15.
• Around 20% of IPPs now offer some form of income drawdown, meaning members are choosing to take benefits gradually at distribution.
• Outside of the survey, Willis Towers Watson’s Expatriate Benefits Solutions business reports that COVID-19-related flexibilities have also been made under global health and risk insurance plans, expanding eligibility and coverage beyond the typical expatriate population, specifically to include key employees who have (or are still) working remotely from their country of employment during the pandemic.

About the survey

The Willis Towers Watson 2020 International Pension Plan Survey covers 988 IPPs and ISPs sponsored by 932 companies. Download a free copy of the survey here.

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 45,000 employees serving more than 140 countries and markets. 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.