Pension

Pension plans are mainly funded by the employer through monthly or quarterly pension contributions. The accumulated pension reserves are distinctively allocated to each eligible employee, clearly representing the build-up of his individual pension rights, to be paid out either at the age of retirement or earlier when the employment contract comes to an end.     

The main concern regarding the accumulated pension reserves of any group pension scheme is their consistent and attractive annual return in combination with low annual plan charges.  

Pension plans can be designed around a large variety of possibilities and provisions, such as:     

• On “defined benefits” to be reached at the age of retirement; on “defined contributions” as a percentage of the employee’s annual earnings or even on “voluntary employer’s contributions”.

• Involving an annual return guaranteed by the insurer or based on allocations in unit-linked funds which do not provide any capital nor yield guarantee.

• On the pension provider’s own internal funds or on external funds.

• Involving a defensive or more aggressive investment strategy, to be defined by the employer or by the employee.

• Solely employer-funded or also employee-funded.

• Other important criteria are the taxation due on paid contributions, the fiscal deductibility of the employer’s contributions, whether the subscribing employer is established in or outside the EU, the portability of employee’s accumulated pension rights,  the applicable penalties in case of pension plan termination and the taxation on paid out pension benefits (FATCA).

• A limited number of insurers have started to offer international pension plans which include cost effective external ETF’s (Exchange Traded Funds, managed by companies like Vanguard, BlackRock, VanEck).

• The reasons may be numerous, ranging form dissatisfaction about annual return or plan charges, contradictions between initial and present pension requirements, unsufficient investment flexibility, burdensome administration for the HR dept.

• Due to the very nature of pension plans, minor improvements result in significant long term effects.

• As mentioned in “Our Role & Values”, whether for new or existing pension plans,  we always formally waive our commission rights, in order to avoid any negative impact on the yearly return of such long term benefit.