Employee Benefits

Retirement Savings

Individual retirement fund members are becoming more financially aware, and are demanding a greater range of flexible benefits from their employers to meet their individual financial needs. An employer who is able to meet the needs of his employees will have an advantage when it comes to retaining existing and attracting new staff.

3 x 2 offers retirement savings prducts which allows employers to provide flexible risk and retirement benefits for their employees in a single integrated product. These products aim to provide a comprehensive range of benefits to meet the needs of both large and small corporate clients and offers employers the option of selecting between a pension or provident fund for their staff.

The key differences between pension and provident funds

The primary difference between these two types of retirement funds lies in the tax treatment of employers' and members' contributions and how they receive their retirement benefits.

On retirement, a member of a pension fund may elect to receive up to one third of their retirement savings in cash and the remainder as a regular pension (an annuity), or alternatively may elect to receive the full amount as an annuity during their retirement.

A provident fund pays out the full retirement saving as a once-off cash lump sum, which the member may use or invest at their discretion. Members enjoy tax savings on their retirement contributions, subject to certain limits. Employers who contribute to pension funds on behalf of their staff may also benefit from the tax savings on these contributions, subject to certain limits. Retirement benefits are subject to tax.

Although a pension or provident fund is the most popular vehicle for retirement savings, it may not always be the most cost-effective or appropriate option for smaller groups of employees or professionals.

A personal pension provides a solution to employers for whom a pension or provident fund is not the most appropriate solution. This may be in cases where pension or provident funds are not financially viable or where there is no employer-employee relationship such as in the case of contract workers, sole proprietors and partnerships. In addition many larger firms will find that running a voluntary retirement annuity plan alongside their pension or provident fund for top-up savings differentiates them from other employers and allows participating staff to optimise their tax savings.

A personal pension is a grouped retirement annuity product. It is unique in that it combines the flexibility of individual member choice with the convenience of an employer-managed group retirement fund.

A personal pension provides a simple, cost-effective way to ensure all employees save for their retirement in a disciplined manner. In addition, employers may integrate a group risk scheme, providing staff with life and disability cover in addition to their retirement savings.