Consumer Education - Retirement funds
The Retirement Funds Department is responsible for the regulation and supervision of the Pensions Industry. The participants are regulated in terms of various legislation including the NBFIRA Act (No. 2 of 2006), Pensions and Provident Fund Act 1987 and Regulations (Cap 27: 03), Part XIV of the Income Tax Act and NBFIRA Prudential Rules which were implemented on 1st March 2012. The supervisory activities include, licensing, on-site inspections, off-site monitoring, enforcement and complaints handling.
What is the difference between a Pension Fund and a Provident Fund?
A pension or provident fund is a fund that provides an income for a member on retirement or an income to dependents if the member dies. Under a Pension Fund, the member is entitled to receive up to a third of the benefit as a lump sum upon retirement and the remaining balance is paid out as a monthly pension over the member’s lifetime. The Provident Fund pays out the benefit as a lump sum at retirement.
Pension and Provident Funds can either be:
- Employer Sponsored Plans (Occupational Plans): A type of benefit plan that an employer offers for the benefit of his/her employees at no or a relatively low cost to the employees.
- Umbrella Funds: These are usually set up by Fund Administrators. Umbrella funds are used by small employersto provide for retirement for their Staff. Umbrella funds facilitate cost savings, pooled investments and avail the services of independent professional trustees to small sized funds.
- Industry or stakeholder Retirement Funds: a simple pension option which incorporates a set of minimum standards laid down by the government. These standards are designed to make this type of pension simple, cheap and accessible for those on lower incomes.
- Individual Retirement Plans: A form of individual retirement plan provided by financial institutions that provides tax advantages for retirement savings.
