In Brazil, two main types of corporate pension vehicles are available for long-term savings: closed pension plan and open pension plan.
Closed pension plans are private and have their own management structure.
Open pension plans can be either collective or individual, and may be operated by insurance companies, banks, or non-profit organisations. The most common open pension plans available are the Plano Gerador de Beneficios Livres (PGBL) – a product similar to the US 401k plan, and the Vida Gerador de Beneficios Livres (VGBL), for employee’s contribution, as a choice based on the individual income tax treatment.
Swiss Life Network Partner Icatu Hartford, as the biggest bank-independent insurance company in group life, corporate pension and capitalisation, offers to companies a complete pension solution by working not only with PGBL/VGBL in Open Pension Plan but also multi-sponsored in Closed Pension Plan.
First lifecycle funds available in Brazil
Icatu Hartford’s most recent open pension plan innovation is a new range of investment funds which takes into account an employee’s lifecycle. Icatu Hartford is the first insurance company in Brazil to offer this “Minha Aposentadoria” (My Retirement) fund system, similar to lifecycle funds in the US. With “Minha Aposentadoria” investment funds, the asset allocation is actively managed according to each participant's age. The product offers investments in shares without a substantial increase in risk. The mix of shares and bonds is adjusted by Icatu Hartford Asset Management according to the insured’s situation: a high proportion of shares when the client is young and a high proportion of bonds when retirement age approaches.
Multi-sponsored plans
In 1996, Icatu Hartford created “IhPrev”, as one of the few insurance companies specialized in Multi-Sponsored Plan. This product allows a sponsoring company to outsource its pension fund administration and/or asset management. This can be to Icatu Hartford Administração de Recursos, which specializes in the administration of financial resources, including long-term savings, or to another external asset manager, without any interests’ conflict since Icatu Hartford is not affiliated to any banking group.
There is currently a strong trend in Brazil for companies with in-house management of their pension plans to transfer their reserves to a multi-sponsored solution. This is because it offers several advantages:
- Lower fixed costs through outsourced administration and shared infrastructure with other sponsors
- Improved services for plan participants, mainly via the internet – insurance companies’ core business
- Externalised liabilities (by Law)
- Modernised governance structure (provided by “IhPrev”)
- Choice of joining the investment funds offered by Icatu Hartford or establishing a fund with a preferred bank. (provided by “IhPrev”)
Among the features of the IhPrev multi-sponsored plan are:
- Total segregation from other sponsors’ plans
- Individual plan cost structure
- Possibility of nominating board members
- Possibility of nominating a plan director and plan committee
- Annual sponsors meeting every April
- Freedom of choice when hiring the actuarial consultant
- High-tech services platform and dedicated consultants available to HR managers and plan participants.
According to the local regulator responsible for closed entities, between 90% and 95% of new plans created as closed entities tend to be managed in a multi-sponsored solution, and migration from current in-house plans to multi-sponsored plans is high. This trend has also been confirmed by a survey of the top 13 pension consultants in Brazil, conducted by Icatu Hartford.
Open pension plans can be either collective or individual, and may be operated by insurance companies, banks, or non-profit organisations. The most common open pension plans available are the Plano Gerador de Beneficios Livres (PGBL) – a product similar to the US 401k plan, and the Vida Gerador de Beneficios Livres (VGBL), for employee’s contribution, as a choice based on the individual income tax treatment.
Swiss Life Network Partner Icatu Hartford, as the biggest bank-independent insurance company in group life, corporate pension and capitalisation, offers to companies a complete pension solution by working not only with PGBL/VGBL in Open Pension Plan but also multi-sponsored in Closed Pension Plan.
First lifecycle funds available in Brazil
Icatu Hartford’s most recent open pension plan innovation is a new range of investment funds which takes into account an employee’s lifecycle. Icatu Hartford is the first insurance company in Brazil to offer this “Minha Aposentadoria” (My Retirement) fund system, similar to lifecycle funds in the US. With “Minha Aposentadoria” investment funds, the asset allocation is actively managed according to each participant's age. The product offers investments in shares without a substantial increase in risk. The mix of shares and bonds is adjusted by Icatu Hartford Asset Management according to the insured’s situation: a high proportion of shares when the client is young and a high proportion of bonds when retirement age approaches.
Multi-sponsored plans
In 1996, Icatu Hartford created “IhPrev”, as one of the few insurance companies specialized in Multi-Sponsored Plan. This product allows a sponsoring company to outsource its pension fund administration and/or asset management. This can be to Icatu Hartford Administração de Recursos, which specializes in the administration of financial resources, including long-term savings, or to another external asset manager, without any interests’ conflict since Icatu Hartford is not affiliated to any banking group.
There is currently a strong trend in Brazil for companies with in-house management of their pension plans to transfer their reserves to a multi-sponsored solution. This is because it offers several advantages:
- Lower fixed costs through outsourced administration and shared infrastructure with other sponsors
- Improved services for plan participants, mainly via the internet – insurance companies’ core business
- Externalised liabilities (by Law)
- Modernised governance structure (provided by “IhPrev”)
- Choice of joining the investment funds offered by Icatu Hartford or establishing a fund with a preferred bank. (provided by “IhPrev”)
Among the features of the IhPrev multi-sponsored plan are:
- Total segregation from other sponsors’ plans
- Individual plan cost structure
- Possibility of nominating board members
- Possibility of nominating a plan director and plan committee
- Annual sponsors meeting every April
- Freedom of choice when hiring the actuarial consultant
- High-tech services platform and dedicated consultants available to HR managers and plan participants.
According to the local regulator responsible for closed entities, between 90% and 95% of new plans created as closed entities tend to be managed in a multi-sponsored solution, and migration from current in-house plans to multi-sponsored plans is high. This trend has also been confirmed by a survey of the top 13 pension consultants in Brazil, conducted by Icatu Hartford.