Are we at a tipping point for International Pension Plans?

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By now, we are all well-versed in the reality that there’s an ever-increasing pension funding gap globally.  After all, we are living longer and aspiring to retire earlier.  Advanced nations are struggling with how to cope with this at a state level whilst the sales message continues to beat this drum in support of domestic private arrangements.  But the continuing demographic shift is a problem for expatriates and internationally mobile workers too, perhaps even more so.

The OECD predicts that in 40 years’ time, life expectancy at age 65 will have increased, on average across all OECD countries, by more than 4 years for both men and women.  The upshot is, of course, that the next generation, globally, will have to save considerably more than they do now for financial support through retirement.

Those considered to be ‘international’ often cannot avail of first-pillar state pensions and may not be able, or willing, to make prolonged retirement savings through a domestic occupational or personal arrangement.  Consequently, there is a growing cohort of people who will need to make other arrangements, most likely an international pension plan or “IPP”. 

Whilst important, it’s not just the retirement funding gap that is driving the agenda here, because retirement behaviours are starting to shift in much the same way as they are in most advanced domestic markets.  People want more flexibility in retirement or semi-retirement, reducing their hours or working part-time, where top-up income is a more sporadic affair.  There is greater mobility in retirement too, which requires a multi-currency approach to investments and benefits.  The changing demographics also mean that those in retirement age are not just funding themselves anymore: retirees in their 50s and 60s could, conceivably, face education or life-starting expenses for children at the same time as long-term care commitments for parents.  Doing so across borders using pension savings requires a very adaptable IPP.

Increasingly, companies with an internationally mobile workforce are seeking a competitive edge by seeking to replicate, as far as possible, the benefit packages that domestic employees enjoy.  The traditional ‘expat package’ of high salary and bonus, alongside accommodation and education expenses has become something of an anachronism.  Now, itinerant careers and long-term international placements are commonplace and need career-spanning benefit packages, including pension provision.  This is meat and drink for a good IPP product because it provides a regulated off-balance sheet solution with highly flexible benefit delivery options.  And importantly, most recommended IPPs will be based in stable, reputable jurisdictions such as the Isle of Man, ideal for sheltering savers from any economic or political risks that exist in the countries in which they might work during their careers.  They should have access to an international pool of investment options too. 

Isle of Man pension providers know this landscape intimately and provide a whole host of complementary products and solutions.

It’s a long-preserved notion that pensions, particularly IPPs are sold not bought.  In other words, potential IPP clients must be presented with, and subsequently convinced of, the benefits before buying.  But now everyone, from governments to corporations to private individuals, is starting to pay attention to the obvious necessity.  We could well be at a tipping point where demand for high quality supply tips the equation such that buyers, rather than sellers take the lead. 

Cue Isle of Man IPPs.

 

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