Cash-strapped businesses outsourced pension administration to industry firms
Los Angeles, CA (PRWEB) April 16, 2012
Firms in the Third Party Administration of Pension Funds industry provide administration services to retirement plans (see IBISWorld report 52511, Retirement and Pension Plans) on a fee basis, which helps employers limit total costs for sponsoring retirement plans and maximize employee retirement benefit outcomes. Over the five years to 2012, IBISWorld estimates that revenue in the Third Party Administration of Pension Funds industry has grown at a 1.0% average annual rate, including projected growth of 0.8% in 2012 to $6.2 billion. According to IBISWorld industry analyst Kevin Culbert, growth over the five-year period was primarily underpinned by growth in US retirement assets and increased outsourcing of retirement plan administration to industry firms. During the period, US retirement assets grew at a 0.7% average annual rate.
These growth rates mask the effects of the recession, though, which caused asset values to plummet across the economy. US retirement assets declined 21.3% in 2008, which corresponded to a 14.8% drop in industry revenue from asset-based fees. The drop in US retirement assets coincided with an increase in litigation undertaken by plan participants (employees) against their employers over the causes of investment losses. Says Culbert, “This trend boosted industry demand because employers became more focused on keeping plan costs down.” Industry growth resumed in 2010 as the economy began to recover. The Third Party Administration of Pension Funds industry is largely composed of small companies that account for less than 1.0% of industry revenue, many of which operate in narrow geographic markets. Furthermore, many of the firms operating in this industry specialize in creating and administering plans for niche industries. Only the largest industry operators, including Aon Hewitt and Xerox, operate on a national basis.
Beginning in 2014 and continuing through the following years, IBISWorld expects the industry to exhibit strong growth. Its health will be driven primarily by improvements in US economic growth, albeit at lower rates than in 2007, which will drive increases in US retirement assets. US retirement assets are projected to expand through 2017 due to projected rises in consumer contributions toward retirement as the population ages, employment levels rise and capital markets stabilize. Retirement plan administration outsourcing is also forecast to rise, driven by the increased complexity of regulation and legislation regarding retirement plans. For more information, visit IBISWorld’s Third Party Administration of Pension Funds in the US industry report page.
Follow IBISWorld on Twitter: https://twitter.com/#!/IBISWorld
Friend IBISWorld on Facebook: http://www.facebook.com/pages/IBISWorld/121347533189
IBISWorld industry Report Key Topics
This industry is composed of firms that primarily provide administration services to employer-sponsored retirement plans on a fee basis. Firms that primarily provide investment or record keeping services are not included in this industry.
Key External Drivers
Industry Life Cycle
Products & Markets
Products & Services
Globalization & Trade
Market Share Concentration
Key Success Factors
Cost Structure Benchmarks
Barriers to Entry
About IBISWorld Inc.
Recognized as the nation’s most trusted independent source of industry and market research, IBISWorld offers a comprehensive database of unique information and analysis on every US industry. With an extensive online portfolio, valued for its depth and scope, the company equips clients with the insight necessary to make better business decisions. Headquartered in Los Angeles, IBISWorld serves a range of business, professional service and government organizations through more than 10 locations worldwide. For more information, visit http://www.ibisworld.com or call 1-800-330-3772.