International Pension Plan Survey Report 2019

Key findings from this year’s survey

Industry sectors: The largest concentration sponsoring IPPs/ISPs continues to be from Banking and Finance, followed by Oil and Gas, and Consumer Goods and Retail.

Membership categories: The majority of IPP/ISPs are set up to provide savings or retirement benefits for expatriates who are not covered by any home country plans and/or not participating in a local host country retirement plan, though some also include local employees and executives. As in previous years, the majority of IPPs and ISPs in this year’s survey were set up for a ‘global’ workforce.

Market size: The total assets under management for these is estimated to be around US$15.8 billion compared with US$14.7 billion in last year’s survey. The IPPs/ISPs in our survey have a total membership that ranges from fewer than 10 members to more than 10,000 members spread across the globe.

Vesting period: Three-quarters of IPPs and ISPs in our survey offer immediate vesting, even though incorporating vesting criteria into the IPP/ISP design can encourage employee retention. Where vesting rules do exist, flat (or cliff) and phased vesting schedules are equally popular.

Objective: The main objective of IPPs/ISPs in most cases is the provision of retirement benefits (IPP), though shorter-term savings vehicles (ISP) are also common.

Increasing prevalence: Out of the total number of IPPs and ISPs in our survey, around 22% were set up in the last three years, with 24 plans set up in 2019 alone. IPPs/ISPs are being set up for multiple purposes, and we expect this trend to continue, leading to more diverse memberships in the future. In particular, this year we are seeing significant interest in IPPs/ISPs for Middle East populations following recent changes in legislation. We also continue to see high demand for IPPs/ISPs in Singapore.

Design features: DC plans remain the most prevalent design basis, with DB plans still in operation but typically closed to new members and falling in numbers.

Plan vehicle: Trust-based vehicles continue to be the most popular way to segregate and protect member assets. Contract-based plans are also common, which may be due to the historic cost of trust provision as well as a general aversion to trusts in certain regions, such as Guernsey. For contract-based arrangements, Luxembourg is the most common domicile.

Fund management: The number of IPP/ISPs that offer access to external fund managers (as opposed to internal funds only, which are typically limited to the provider’s proprietary investments) decreased from last year’s survey but continues to be the most popular offering.

Distribution options: Lump sum payments (57% of responses) continue to be the most popular form of distribution.

Technology and artificial intelligence: Improvements in technology will also help drive the development of providers’ administration platforms, allowing them to handle more diverse and complex arrangements and improve member experience. Many providers are reporting greater investment in the use of artificial intelligence (AI), robotics and other developing technology in this area now and in the future.

Lifestyle strategies: Lifestyle strategies or funds continue to feature in the investment offering, where over 16% of those surveyed offer one Lifestyle option, and roughly 31% of the IPPs and ISPs offer more than one Lifestyle option to provide for different membership demographics, risk profiles or currencies.

Investment funds: Half of IPPs/ISPs in our survey offer up to 10 investment funds for members to choose from. The remainder offer in excess of 10 investment options, with a significant number offering over 40 different investment funds.