Willis Towers Watson Public : ‘Cross border’ pension plans continue to grow as global instability rises

NEW YORK, NY, May 14, 2024 - Demand for international pensions and savings vehicles is continuing to grow, beyond just expatriate communities, in order to protect local employee groups from increasing political and economic volatility, according to leading global advisory, broking and solutions company WTW (NASDAQ: WTW).

WTW's latest International Pension Plan Survey found that the number of international pension plans (IPPs) and international savings plans (ISPs) being offered in countries operating in challenging political or economic circumstances has risen from 54 five years ago to 126 in 2024. This increase has been a consequence of economic challenges, including rising inflation around the world and a higher-than-normal number of sovereign defaults - 18 in 10 countries since 2020 - that have made local pension and savings provision riskier for local employees in certain countries.

Employers are increasingly trying to reduce or remove these risks by providing more secure IPPs and ISPs, usually held in trust (64%) for additional security, in order to protect employees' retirement pots and savings from localized instability. This is particularly important where local pensions are invested locally.

"Economic and political instability in many countries, along with rising inflation, have created many challenges for employers looking to provide stable pension and savings arrangements for their employees around the world," said Tony Broomhead, managing director, Integrated and Global Solutions, WTW. "IPPs and ISPs can be used to provide a more secure vehicle and deliver better pension outcomes with access to global hard currency investment funds, reducing exposure to local high-risk markets."

Another increasing trend highlighted in WTW's report shows the growing demand for environmental, social and governance (ESG) investment options within the fund ranges offered by IPP and ISP providers. The report shows that while over half (58%) of IPPs and ISPs now offer ESG funds, this will further increase as plan sponsors' interest in reviewing ESG fund ranges rises, with nine out of 11 providers (82%) reporting an increase in switching to ESG funds.

In addition, the report observed a growing need for IPPs and ISPs to offer Shariah investment options following an increasing number of prospective members who were previously unable to participate, due to an absence of Shariah funds.

"We have seen an increase in situations where prospective members of IPPs and ISPs have been unable to participate in plans due to an absence of investment funds that meet their personal or religious principles," said Broomhead. "This often focuses on Shariah, and so there has been a rise in IPPs and ISPs incorporating more choices across broader Shariah asset classes, not just global equity funds. We expect this to continue to increase in popularity in the years ahead and it is not just relevant to IPPs and ISPs but domestic pensions globally as well."

The WTW International Pension Plan Survey 2024 also found that:

• While 56% of IPPs and ISPs operate globally, plans operated in Europe have seen the largest growth, with the number of plans doubling in the past 10 years, now accounting for a quarter (26%) of all plans globally.
• Of the one in eight plans offered to local employees in countries facing challenging political and economic circumstances, Lebanon was the most popular location for such IPPs/ISPs, with 35 plans operated (up from 28 in 2023).
• There are 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 in total, and only 1% of plans have assets over $250 million.

About the survey

The WTW International Pension Plan Survey 2024 was conducted in H2 2023 and covers 1,028 IPPs and ISPs sponsored by 960 companies. It is the 16^th edition of the survey. Download a free copy at International Pension Plan Survey.

About WTW

At WTW (NASDAQ: WTW), we provide data-driven, insight-led solutions in the areas of people, risk and capital. Leveraging the global view and local expertise of our colleagues serving 140 countries and markets, we help organizations sharpen their strategy, enhance organizational resilience, motivate their workforce and maximize performance.

Working shoulder to shoulder with our clients, we uncover opportunities for sustainable success-and provide perspective that moves you.