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Stand-Alone Pension Scheme

How to Successfully Manage a Stand-alone Pension Scheme

Stand-Alone Pension Scheme

How to Successfully Manage a Stand-alone Pension Scheme

The Stand-Alone pension scheme is one of the options available to employers who want to set up an organizational pension scheme for their employees. Similar to the Umbrella Scheme, tax relief and ease of attracting top talent are some of the benefits of setting up pension schemes. The difference between the two types of schemes lies in ownership and management, which in turn affects how employers set them up within their organization. Although setting up and successfully managing a stand-alone scheme is tedious and time-consuming, employers have more flexibility in its management.

In this article, we explore how an employer can successfully manage a stand-alone pension scheme within their organization.

The Stand-Alone Pension Scheme

In the stand-alone pension scheme, the employer is seen as the founder and is solely responsible for running and maintaining it. As a result, they are required to know, understand and follow all the rules of setting up an organizational pension scheme, be aware of regulations and guidelines of external bodies, and strategically invest contributed funds to ensure enough returns that will provide a stable income for their retired employees.

Setting Up a Stand-Alone Scheme

Three important points provide the basis for the amount that will be contributed towards an employee and these need to be taken into consideration before setting up this type of scheme. These include: 

  • Contributions of other schemes in the industry, which helps determine competitive rates
  • Benefits that will be offered to employees
  • Employee profile i.e age and type

An actuary can help make informed decisions through the use of statistical data

Managing a Stand-Alone Pension Scheme

To successfully manage a Stand-Alone scheme, employers should appoint service providers who are knowledgeable and experienced enough to assist in its running and maintenance. These are: 

Trustee

A person or firm that ensures the scheme complies with the law and makes decisions on all matters relating to the trust.

Requirements: 

  • Technical pension skills, knowledge, and qualifications
  • Ability to make decisions using a wide range of information 
  • Good communication and interpersonal skills 

Administrator 

Responsible for managing the day-to-day operations of the scheme. They must be familiar with the laws and regulations governing retirement savings. 

Fund Manager 

Responsible for the implementation of the fund’s investment strategy and maintenance of its portfolio trading activities. 

Requirements: 

  • Experience in fund management 
  • Appropriate credentials 
  • Exceptional business, math, and people skills 

Custodian 

An entity such as a bank or financial institution, that has physical control of the contents of the pension plan but have no control in decision-making 

Requirements:

  • Financially strong and insured
  • Competitive fee structure 
  • Good reputation 
  • Able to track performance measures based on the size of the account or fund. 

To qualify for tax relief, schemes must be registered with the Retirement Benefits Authority and applications for exemptions made to the Commissioner of Domestic Taxes. 

Conclusion

Successful management of a stand-alone pension scheme greatly depends on the service providers chosen to assist in its maintenance. Employers should ensure that those chosen have the required knowledge and experience to ensure the smooth running of the scheme.

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