The prevalence of international pension plans (IPPs) and savings plans (ISPs) that multinational companies offer to employees continues to increase — particularly in countries where geopolitical risks are higher.
A new study by Willis Towers Watson (WTW) documents that among 1,028 studied IPPs and ISPs sponsored by 960 companies, 16% were established in just the past five years. The banking and finance sector is the leading player, with 25% of all such plans.
However, in 19 countries where WTW assesses that challenging political or economic circumstances prevail, the number of such plans more than doubled over the five-year period, from 54 to 126.
Among such countries with notable increases in such plans just in 2024 are Lebanon, Ukraine, Russia, Turkey, Uganda, and Zimbabwe.
High inflation and rising costs of borrowing have made it harder for many nations to repay foreign loans or raise funds, according to the study report. There have been 18 sovereign defaults in 10 countries since 2020.
The plans can safeguard employees’ savings and protect them from local economic and political turbulence. “IPPs and ISPs can be used to … deliver better pension outcomes with access to global hard currency investment funds, reducing exposure to local high-risk markets,” said Tony Broomhead, managing director of integrated and global solutions for WTW.
Historically, most IPPs and ISPs were established for expatriate workers not covered by any home-country plans. However, there’s been a growing trend toward making them available to local employees as well; one in four plans set up in the last five years does so.
Overall, 14% of IPPs and ISPs are offered to local employees, and about one in eight are offered to such workers in countries operating in challenging political or economic circumstances.
Meanwhile, the report observed growth in the prevalence of IPPs and ISPs offering Shariah investment options, but also noted that there’s a need for more of the same. It’s a response to prospective plan members being unable to participate due to an absence of investment funds that meet their personal or religious principles, WTW noted.
“There has been a rise in IPPS and ISPs incorporating more choices across broader Shariah asset classes, not just global equity funds,” said Broomhead. “We expect this to continue to increase in popularity in the years ahead.”
Other facts of note from the study:
- There is estimated to be $19.5 billion in IPP/ISP assets under management globally, an increase of 33% since 2018.
- Most plans (52%) have assets of less than $5 million, and only 1% have assets over $250 million.
- The country with the most IPP/ISP plans is Lebanon, with 35.
- Luxembourg and the Isle of Man are the most common domiciles for these plans, with half of them headquartered there.
