Pension Fund Administration and Management

A Pension Scheme is a well-recognized moral obligation worldwide for employers to put in place a pension plan for their employees.

The Pension is a form of appreciation by the employer to an employee who has faithfully served the institution, in return for periodical payments made by both the employer and the employee called contributions.

 

Pension Scheme

A Pension Scheme is set up by an irrevocable trust. The Pension Trust set up by the employer will then be affiliated to the Zambia State Insurance Pension Trust Fund (ZSIPTF) or can be managed under a single Trust.

How is a Pension Scheme established?
A Pension Scheme is set up by an irrevocable trust. The Pension Trust set up by the employer will then be affiliated to the Zambia State Insurance Pension Trust Fund (ZSIPTF) or can be managed under a single Trust. 

How is a Pension Scheme funded?
The Pension Scheme requires participation from both the employer and the employees. The contributions are expressed as a percentage of the basic payroll of the employees. 

Who is Eligible to join the Pension Scheme?
All permanent and Pensionable employees who are at least 16 years old but not more than 50 years and have completed their probationary period. 

When is the Pension payable and for how long?
When an employee reaches normal retirement age, the Committee of Pension Trustees will notify the Fund Manager (ZSIC Life Limited) through a claim form, the pension would become payable immediately.The Pension can either be commuted for cash in total or up to 50% depending on the amount of annual pension accrued. 

What benefit provisions are in the Pension Scheme?
The Pension Schemes administered by ZSIC Life Limited provides for any of the following: Normal retirement benefits Medical retirement benefits Late retirement benefits Deferred Retirement benefits Refund of contributions plus interest. Transfer of accrued benefits to another approved Fund.

Are there other provisions in the Pension Scheme?
ZSIC Life Limited knows that customer needs are ever changing and as such, its Group Pension Plan can also provide for widows, widowers or orphans pension. Other provisions may include:

  • Transfer of accrued pension benefits to the fund of a new employer when one leaves current employer.
  • Additional Voluntary Contributions by individual employees with the consent of the employer may also assist the employee purchase additional pension benefits.

When does a pension plan become payable to the employee?

  • Retirement of an employee on grounds of age or ill health;
  • On withdrawal of an employee’s service either through termination of employment or death, a refund of accrued contributions is payable at deat

Types

There are basically three types of pension plans offered by ZSIC Life Limited.
These are :

  • Defined Contributions Scheme – under this pension plan, an employee effectively has their own individual account and the amount of pension will depend on how much the employer and the employee contribute to the scheme and returns on investment.
  • Defined Benefits Scheme – under this pension plan, an employee is promised a certain level of pension at retirement, which will depend on the final salary preceding retirement and the years the employee has been a member of the scheme.
  • Hybrid Scheme - A combination of Defined contributions and Defined benefits scheme plans

What benefits accrue to the Employer?

  • A pension is a simple tax efficient way for the employer to design a deferred compensation plan and contributions paid under an approved Pension fund can be treated as deductible expense for the computations of Corporate Tax.
  • Establishment of a Pension fund overcomes the problem of having to dip hands into the working capital of the organisation on retirement or death of an employee.
  • Existence of a Pension Fund reduces labour turnover as it induces workers to leave later in life. Productive technology is enhanced by long-term commitments of the long serving and experienced team of employees.
  • Allows the employer to compete for highly technical mobile employees who get little pension wealth under other pension plans, which lack portability.
  • Administration of the scheme is simplified as it is funded through payroll deductions.
  • It increases the morale of employees thus achieving a consequent enhanced productivity.
  • It maintains healthy labour union and management relationships.
  • The cost of providing the benefits is spread over a number of years.

What Benefits accrue to the Employer?

  • A pension is a simple tax efficient way for the employer to design a deferred compensation plan and contributions paid under an approved Pension fund can be treated as deductible expense for the computations of Corporate Tax.
  • Establishment of a Pension fund overcomes the problem of having to dip hands into the working capital of the organisation on retirement or death of an employee.
  • Existence of a Pension Fund reduces labour turnover as it induces workers to leave later in life. Productive technology is enhanced by long-term commitments of the long serving and experienced team of employees.
  • Allows the employer to compete for highly technical mobile employees who get little pension wealth under other pension plans, which lack portability.
  • Administration of the scheme is simplified as it is funded through payroll deductions. It increases the morale of employees thus achieving a consequent enhanced productivity.
  • It maintains healthy labour union and management relationships.
  • The cost of providing the benefits is spread over a number of years. 

What Benefits accrue to the Employee?

  • There is a hedge against exposure to financial risks as benefits accrue over time.
  • Accrued benefits can be transferred to a company with a similar arrangement when an employee changes jobs. (Is portable across jobs).
  • Guaranteed retirement income security for workers. Benefits paid at retirement are not taxed.
  • Tax efficient form of saving for retirement.

 

For more information please contact us or fill-in the quick enquiry form below.  We shall respond to you as soon as possible.

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