The number of international pension and savings plans (IPPs and ISPs) has soared in the last couple of years, a recent study has revealed.
Research from Willis Towers Watson encompassing 988 IPPs and ISPs shows that assets under management for these schemes has increased to $17.2bn (£12.4bn, €14.2bn) in 2020, from $15.8bn in 2019.
There was a 13% rise last year in the number of IPPs being offered as a safer option in locations with challenging economies, even though they were originally aimed at the expat population.
Michael Brough, senior director in Willis Towers Watson’s global services and solutions group, said: “Many large multinationals, charities, and international governmental organisations find it challenging to offer good savings and pensions benefits to their global staff.
“Local pension systems may be exposed to high economic insecurity, or they may not allow expats to join. These flexible cross-border schemes are continuing to strengthen their position in the market, and we expect that to continue in 2021.”
‘Safe harbour’
The Willis Tower Watson research also discovered that IPPs and ISPs proved to be highly flexible in adapting to the financial pressures caused by the outbreak of covid-19.
As a result, Brough believes these types of retirement plans may be better placed that domestic ones, as more economies could fall victim to the pandemic this year.
“Last year, a much higher number of sovereign states defaulted on their government debt, including some, like Lebanon, for the first time,” he said. “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 who are wary of putting their staff into pensions that may fail. They often 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.”
