IKEA, the Swedish furniture retail giant, will implement a new multi-fund pensions arrangement for approximately 600 mobile employees in July, which can double up as a private retirement fund for employees should they leave the company.
The DC savings package, to be invested with Zurich-based Swiss private bank AIG, offers mobile workers a choice of four different asset mix funds into which they can invest the 10% pensions contributions provided by the company. Plans are also being made to include an additional voluntary contribution element.
Andreas Rohrbach, manager, pensions and insurance at IKEA’s pensions administration centre in Amsterdam, comments: “The first level is a cash balance fund where IKEA guarantees 3.5% return, so it is run very much like a pension scheme. For the other three funds the employee takes over the risk exposure. “
Rohrbach says proposed asset allocation levels are a 60% share limit on the second fund, rising to 75% and finally a 90% ceiling on equities in the riskiest fund. A final decision on allocation levels will be announced this month.
Of the remaining assets, 10% of each fund is expected to be invested in money market funds and the rest in bonds.
Rohrbach says the decision to run the investment through AIG reflects the individualised pension system sought by the company. “The participant has a fund, but the underlying factor is not that IKEA goes out and buys into different funds such as mid cap, US or UK large caps, because then we are buying the average. Here the employee buys shares in the banks funds and we have asked the bank to run an IKEA portfolio.
“We give the bank asset allocation limits and within that quality standards on the kind of rated shares they can buy.”
Participants will be able to view accounts via the company’s intranet system, which Rohrbach says will be updated monthly and show underlying allocations and shares in individual portfolios.
Employees will also have the ability to move between funds to a reasonable degree, or split out contributions between the plans depending on their chosen risk/age profile.
Significantly, if employees leave IKEA they can remain in the scheme. “It boils down to it being a private plan to which the employee can keep contributing if they wish.”