In a bid to fight global political and economic instability, employers are turning to cross-border pensions and savings packages.
According to advisory firm Willis Towers Watson, assets under management in international pension- and savings plans (IPPs and ISPs) rose to $15.8bn (£12.1bn, €14.4bn) in 2019, from $14.7bn in the previous year.
The study included 932 cross-border products sponsored by 877 firms.
These plans were introduced to serve ‘global nomads’; namely, people who had to spend time in several different countries as part of their job.
They have now become increasingly popular among ‘local expats’, who are foreign members of staff working under local contracts, and complex employee groups.
Viable alternative
Michael Brough, senior director in Willis Towers Watson’s global services and solutions group, said: “The growth in IPPs and ISPs has continued apace, as their appeal widens beyond the traditional senior executive global expatriate.
“We expect stronger interest in 2020, as companies explore the flexibility of these vehicles in their global struggles to attract and retain the best talent.
“Large multinational employers often look to provide minimum levels of risk benefits, supplementary medical care, and a pension contribution for all their employees, globally.
“This can be a challenge in developing markets, where local supplementary pension systems might have severe economic insecurity.”
Brough said that IPPs and ISPs can fill in when there are no local alternatives.
He continued: “In other locations, where there are large expatriate populations, such as Singapore, IPPs are also growing for expatriate groups excluded from the local host pension system, and who may also be unable to be maintained in their home system.
“In such cases, employers need to figure out ways to provide pensions and savings benefits, and IPPs are proving popular.”
UAE demand on a hike
With recent regulatory changes at the Dubai International Financial Centre (DIFC), where employers will have to offer a workplace savings plan, Willis Towers Watson believes the centre could turn to cross-border products.
“Employers can use the centrally-administered default [employee workplace savings (Dews)] plan, or an alternative qualified alternative scheme (QAS),” the advisory firm said.
“It is likely that IPPs and ISPs established in certain approved domiciles will qualify as a QAS, subject to appropriate approvals by the DIFC authorities.
“Willis Towers Watson reports a surge in interest from DIFC-based companies and expects this to continue through the year as companies align to the new regulations, with many looking to opt out of the Dews plan and instead establish a more flexible and significantly lower cost QAS by the next opportunity in December 2020.”
