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Corporate Pension Funds

A Corporate Pension / Provident / Retirement Fund is essentially a formal arrangement between a corporate / business and its staff. The purpose of the fund is to provide funding for the retirement provision of the staff of a company. The provision can be financed in many ways, and will eventually be utilised to purchase a pension for staff once they reach the selected retirement age.

Do you need a Retirement Fund for your staff?

Many large insurers offer a range pf retirement products for companies to choose from. Business owners can either create their own a Standalone Fund, or they can opts to join one of the insurers Umbrella arrangements. Most insurers offer two umbrella arrangements - namely a Provident or a Pension Umbrella fund. They are essentially large differences between the way Umbrella funds and Stand Alone funds are managed.

What is a Pension Fund?

A Pension Fund is a retirement provision fund which has been set up by the business owners to benefit the staff and assist them in funding their personal retirement provision. The fund is used to provide for regular annuity payments (or pensions) for the members (staff) when they reach retirement. It can also be used to provide a lump sum benefits for the beneficiaries / dependants of these members upon death of the member.

What is a Provident Fund?

A Provident Fund is also a retirement provision fund which has been set up by the business owners to benefit the staff and assist them in funding their personal retirement provision. However the difference between the above Pension Fund and a Provident Fund is that a Provident Fund provides a cash lump sum benefit for the staff / members upon their retirement' This Lumps Sum may also be used, as above, to provide benefits for the dependants upon death of the members. When the member approaches retirement, they receive a Lump Sum payment, as opposed to a monthly annuity payment, and they must choose how and where to invest these funds.

What is a Retirement Annuity Fund?

A Retirement Annuity fund is set up by an insurer for the benefit of individual investors. Similar to a Pension Fund in nature, but purchased by individuals rather than corporate or business owners. These RA's as they are called are tax efficient and can be used to supplement the corporate / business pension or provident that was set up. There are numerous tax and savings benefit to personal retirement annuities and are the perfect vehicle for individuals who run their own small businesses as well.

What is a Standalone Fund?

If you wish to set up a Standalone Retirement Fund, then the company is required to set up a board of trustees. These individuals determine the scheme rules and must manage the fund within the guidelines of their fiduciary responsibilities. These individuals are also responsible for the appropriate management of investments. The trustees must determine the strategy for investing the funds correctly, and are able to select from a wide range of investment portfolios.

What is an Umbrella Arrangement?

These funds are set up by the insurers, and they provide the administration service for the corporate. The employer or group of employers apply for membership as a participating employer. The benefit of umbrella funds is that these are already set up, and registered with a predetermined set of rules. The Insurers establishes a board of trustees. This provides an environment with less onus of the employer, who can rather focus on their own business, and not that of being a retirement fund, or investment company.