Supporting your people around the world Retirement savings for mobile employees in the hotel industry
Helping you to support your people The global recession had a big impact on the hotel and leisure industry, with fewer holidaymakers and business travellers. However we are now seeing a resurgence, with forecasts of international travellers growing by 3.3% a year, and reaching 1.8 billion by 2030*. This can be attributed to a number of factors, including the following: Babyboomers are reaching retirement age. They have more disposable income as a result of personal savings and good pension planning, and are making travel a major focus. * Source: UNWTO Tourism Towards 2030 There is an easing of travel restrictions, particularly in Asia where restrictions on visas for international travel have generally been relaxed. Technology has transformed the travel industry in recent years, and there is a large increase in the use of search engines to drive the best deals. Attracting and retaining suitable staff to meet the demands of the growing traveller population can be an issue, but it s a vital element for successful succession planning. A recent Hotel Management white paper Revitalize your succession planning strategy, states that establishing an education and recognition program to keep employees engaged strengthens profitability, reduces turnover, and helps achieve world-class service delivery and customer satisfaction. The hotel sector suffers some of the highest attrition rates of any industry, and improving this by even a small amount can have a positive impact on revenue. Helping employees to understand the benefits of long-term savings, and particularly saving for retirement, is an important part of a benefits package that attracts and retains the best employees. + = = Global mobility is an inherent part of the hotel and leisure industry. Trainee managers can spend two to three years training in different locations, while managers are often on short-term contracts, moving regularly to manage different hotels in different regions. Senior managers are seldom hired locally as years of worldwide experience is usually essential for senior hires. A remuneration package that includes suitable pension provision is a major factor in attracting key personnel and encouraging them to relocate their families. While a local, non-portable, pension arrangement clearly doesn t fit the working patterns and career paths of key employees, an international pension plan often will. Flexible, insurance-based contracts can be a straightforward, cost-effective and engaging way to provide a long-term savings plan that gives both employers and employees the benefits they are looking for. SKILLED AND KNOWLEDGEABLE EMPLOYEES WITH LONGER TENURE HAPPY CUSTOMERS RECEIVE BETTER SERVICE HIGHER REVENUE REPEAT CUSTOMERS AND HIGHER SPEND PER VISIT LOWER COSTS REDUCED HIRING AND LEARNING AND DEVELOPMENT COSTS HAPPY SHAREHOLDER POSITIVE RETURNS AND SHARE PRICE 02
Sharing our knowledge and experience Here are some of the trends we are seeing among our hotel customers. When working with new employers in the hotel industry we are often asked to share our experience, so here are some insights into the ways the industry uses retirement savings plans. Flexible plan design supports both centralised and decentralised organisational structures In our experience, hotel companies are highly centralised and administer their plans from head office or, in some instances, regional hubs although there are some instances of localised administration and payment collection. Vesting to support employee retention Only around 40% of plans use vesting scales that restrict employees entitlement to the value of employer contributions if leaving service in the early years. These tend to be the smaller plans possibly with less retention power and therefore keen to lock in talent with longer vesting scales; customers with larger plans appear to act more paternalistically towards employees and short or no vesting scales are more common. Encouraging employee contributions The majority of our hotel customers offer the opportunity for employees to save more through voluntary contributions. In some cases the employer matches these up to a maximum limit. This engages employees more than employer-only contribution plans by providing a sense of ownership to each member, and it is not uncommon for a plan to have no minimum or maximum employee contribution limit. Our customers look at their retirement savings plans as an essential part of their overall benefits package for expatriate employees, and market it to different groups in different ways. Younger employees and those without existing large retirement savings see a company-sponsored retirement savings plan as a must have benefit. And veterans with large defined benefits accruals still want to maximise their latter-year earnings. In a sector where bonus payments feature prominently, basing contributions on a percentage of base pay plus bonuses can offer an extra incentive for employees, and this is a prominent feature of many plans. Communicating benefits One of the key issues our hotel customers highlight is a lack of investment knowledge and confidence among their plan members to make investment decisions. This is also a common factor outside the hotel sector, and as a customer-driven business we have developed a number of online tools and education materials to help with this issue. Helping members to understand their savings needs and how to achieve their goals is also critical to achieving the right levels of engagement and a simplified investment range can often best support this. Zurich has been providing retirement savings plans to the hotel industry for over 30 years, giving us the experience to find the right solution for your business and your employees. 03
The profile of a plan Now let s take a look at how a plan might be structured. 04 To give you a picture of what a retirement savings plan might look like for your business, here are some facts and figures for a typical plan in the hotel sector. It is based on a sample of 25 plans covering more than 4,000 members within our portfolio. Let s start with the typical profile of employees: The majority of plan members are expatriates or third-country nationals, with local hires making up the difference, mainly in the Middle East. Eligibility to join a plan varies greatly. It includes auto-enrolment, invitation only, and one-year probation. In one instance, the plan is for executives and directors only. Plan demographics show a range of ages from early to mid 20s up to age 71. The average age is mid 40s. Average length of membership is between two and four years but due to the nature of the industry, we often see plan members move to other plans in our portfolio and back again. On average our hotel customers have employees in around 50 countries with eight being the lowest number and 102 the highest. Contribution rates 1 Employer contribution rates are usually between 5 and 10%, and in many cases these are based on seniority. For example, contribution rates for employees are 5-6%+ and for senior management they are 9-10% or more. In some instances, contributions may also be tiered according to length of service. For example, 5-7.5% for less than 10 years service, and an additional 2%+ for 10 years service or more. Matching of employee contributions is a growing trend. Customers who include this feature typically match up to 5% but this can increase to up to 10% for senior management. 40% of our customers allow plan members to make additional voluntary contributions and again this is a growing trend. In terms of contribution basis, we see some variation between basic salary and basic plus, where the plus may be other elements of guaranteed pay or variable pay. Vesting periods 2 Immediate vesting is the most common option. Where vesting scales are applied, all of the employer contributions for the first two years (based on employment start date) are retained by the employer. Within most plans 100% vesting is available after five years of employment, although we do, in a minority of cases, see vesting periods as long as 10 years.
CASE STUDY: An ideal solution for a major employer in the hotel industry 4 The hotel industry can have very complex expatriate profiles, as companies are often present in many locations but with only small numbers of employees in each. 3 Investments Most plans incorporate a limited investment range. In most cases this constitutes no more than 15 funds. Most plan sponsors try to encourage members to select their own investments based on their personal savings goals. However, in most cases the employer usually incorporates a low-risk default option for those members who choose not to self-select. Around one third of all plans now use a lifestyling investment strategy, with an increasing number using this as the default investment option for members. In some cases a single default or lifestyling fund is the only option available. Payment of fees There is an even balance between plans where the employee pays the fees via unit deduction from their account, those where the employer pays, and those where fees are split equally between the two parties. When members leave employment but are allowed to remain invested in the plan, we are seeing a growing trend for the employer to pass on the plan fee to the employee. In response to this trend, we have developed our own solution to allow for this option. 5 Ownership: contract or trust-based The vast majority of plans are held in trust. The most common locations for trusts are the Isle of Man, Jersey and Guernsey. 6 Leaving service options While our corporate savings solution is very flexible in terms of plan design, we see most plans replicating a global design blueprint that tends to reflect larger domestic or corporate head office locations. In most cases benefits cannot be taken until an employee reaches retirement age (65 is common). Although less common, some employers do allow full lump sum payments out as soon as the employee leaves service. While some employees take a lump sum when they leave employment, a range of options may be offered. These include remaining in the plan, and taking a regular income (which is becoming increasingly popular). In some instances hardship payments are permitted while still in service under exceptional circumstances. The company in question had over 600 expatriates of 47 different nationalities based in 63 host locations. Their approach to global benefits mandates a retirement savings benefit wherever their employees may work, and their key global competitors offer a similar benefit. The competition to attract and retain employees was intense, particularly in growth areas like far east Asia, so it was essential that they were able to match or beat the packages offered by their competitors. Our solution meant that our customer could offer employees a similar benefit wherever they were located which remained constant as their careers took them to new locations. Not only did it make existing employee mobility easier but it also helped attract new employees. Our International Pension Plan offered everything the customer needed while removing complexity and time-consuming administration. In particular, having a central contract that covered many locations in a wide variety of currencies for both contributions and investments was enormously beneficial. A single central plan also simplified internal administration and provided for easy to access global management information on their mobile workforce. 05
Zurich International retirement savings solutions The global nature of business means there is a greater need than ever before to have an effective long-term, retirement savings solution in place for expatriates. By understanding the challenges that globalisation and increased international mobility brings to a business, we provide company sponsored retirement solutions that are attractive and engaging for employees, while being simple and efficient. Our retirement savings plans combine institutionally priced funds, transparent fee structures and online administration and servicing. We also offer multiple currency options, trust based solutions, flexible plan design and bespoke vesting scales. The funds available cover the majority of sectors, asset classes and geographical regions via a range of both passive and actively managed funds. The funds are available in a range of currencies and are domiciled in multiple approved jurisdictions. All of the funds available on the platform are managed by leading fund houses. Sophisticated product design means we offer flexibility as standard. We can tailor plans to suit individual needs and regional requirements. Plans can be managed online through Zurich International online (ZIO), our secure, internet-based administration system providing round-the-clock, password-protected access for plan administrators and members. Tiered access levels provide the option for local administrators to only view and manage those member accounts for which they are responsible. Plan members can view their accounts to see contributions paid, nominate beneficiaries, download real-time reports and valuations, switch and redirect funds. Our experienced implementation and relationship managers support the introduction of new plans by working with the employer to confirm expectations and requirements. We also support the companies communication plan by offering a range of engaging and effective communications that make it easy for employees to understand and join the plan. 06
We re here to help For more information please contact your Zurich representative: UK Stewart Allanson Corporate Distribution Manager Phone: +44 (0) 1242 664443 Email: stewart.allanson@zurich.com Asia Pacific and Middle East Peter Cox Head of International Pension Plan Sales, Asia Pacific & Middle East Phone: +971 (0) 56 179 2376 Email: peter.cox@zurich.com Fadi Ashkar Head of Corporate Life & Pensions, Middle East Phone: +971 (0) 4425 2358 Email: fadi.ashkar@zurich.com Europe and other regions Peter Taylor Corporate Distribution Manager Phone: +44 (0) 1624 691230 Email: peter.taylor@zurich.com 07
Important Information Zurich International Life is a business name of Zurich International Life Limited. Zurich International Life Limited is fully authorised under the Isle of Man Insurance Act 2008 and is regulated by the Isle of Man Financial Services Authority which ensures that the company has sound and professional management and provision has been made to protect planholders. For life assurance companies authorised in the Isle of Man, the Isle of Man s Life Assurance (Compensation of Policyholders) Regulations 1991, ensure that in the event of a life assurance company being unable to meet its liabilities to its planholders, up to 90% of the liability to the protected planholder will be met. The protection only applies to the solvency of Zurich International Life Limited and does not extend to protecting the value of the assets held within any unit-linked funds linked to your plan. Planholders will not have the protection of the UK Financial Services Compensation Scheme. Our International Corporate Products are sold through Zurich International Life. Zurich International Life is not authorised to offer insurance products for sale in the United States. Materials are not intended as an offer to invest and do not constitute an offer or a solicitation of an offer to buy securities in any other country or other jurisdiction in which it is unlawful to make such an offer or solicitation. Calls may be recorded or monitored in order to offer additional security, resolve complaints and for training, administrative and quality purposes. Zurich International Life Limited provides life assurance, investment and protection products and is authorised by the Isle of Man Financial Services Authority. Registered in the Isle of Man number 20126C. Registered office: 43-51 Athol Street, Douglas, Isle of Man, IM99 1EF, British Isles. Telephone +44 1624 662266 Telefax +44 1624 662038 www.zurich.com ZIL10410 (173002246) (05/16) TCL