Employer’s Alternative for Non-Bermudian Retirement Planning
Why does this plan make sense?
The current Bermuda National Pension Scheme (Occupation Pension) Act 1998 does not require pension plans for non-Bermudian Employees (excludes spouses of Bermudians). This allows flexibility for Employers to use non-registered providers to facilitate and maintain locked-in investment accounts for work permit staff which provide many of the benefits of a pension, but with added flexibility. Initially when many companies set up their registered pension plans for their employees, they included Bermudians and non-Bermudians in the same plan and had the same vesting periods and terms and conditions.
Given that many non-Bermudian employees stay in Bermuda for shorter periods of time, many companies eventually set up unregistered plans to enable non-Bermudians to cash out their plans when they left Bermuda, instead of having the funds locked in a registered plan until retirement age.
LOM developed a Retirement Savings Plan (“RSP”) to provide an alternative investment product for employers with non-Bermudian employees. The RSP provides many of the benefits of a pension plan, including a provision for funds to be locked in. In addition, LOM provides efficient timing of investment instructions which provides less out-of-market time for clients’ funds.
Non registered pension plans are essentially locked-in investment savings plans. LOM has been administering an Investment Savings Plan for years for individuals and for employees through direct payroll deductions.
The RSP Agreements provide for vesting, normal retirement date, locked-in provisions and are custom tailored to each company’s needs. As current legislation does not require unregistered pension plans, each RSP is uniquely structured to best suit your company and employees.
There are many key advantages to using the LOM RSP, namely:
- A low account administration fee of 0.25% per annum is charged (compared to 1.0 – 1.5% charged by the major pension administrators for most plans), leaving more of your money invested.
- Non-Bermudian Employees have the option to receive funds at termination of their employment. The funds are not locked-in until retirement age, as with a registered pension plan.
- There are no start-up fees for the Employer or Employee.
- The Plan provides an added company benefit for non-Bermudian Employees with simplicity and ease for account set-up and investing.
- The Employer and Employee contributions can be made weekly, bi-monthly or monthly.
- The investment instructions for contributions received are made within 24 hours of receipt of the funds.
- Each Employee has his or her own locked-in investment account with LOM where funds are locked-in until: (1) retirement date or (2) termination of employment.
- The Employer sets up a parallel locked-in account during the vesting period where contributions match the mutual fund investments selected by the Employee and may be adjusted according to the Employee’s instruction.
- At the end of the vesting period, the Employer’s account is rolled into the Employee’s account and remains locked-in, subject to the previously noted conditions.
- The Employee’s contributions, the Employer’s matching portions, if any, vesting formula, retirement date and number of yearly changes to fund allocations are all customized by the Employer.
- The Employer’s and Employee’s contributions are generally net of payroll tax obligations (which remain the Employer’s responsibility).
- Secure on-line account access is available for Account Holders.
- Additional contributions by Account Holders can be made at any time.
- There is a selection of eight investment funds available for investment diversification:
- For investment allocation examples download our investment worksheet.
- Bermuda to US dollars may be exchanged on a 1 for 1 basis if the Employee agrees to ultimately receive liquidated funds in Bermuda dollars.
- Applicable foreign exchange rates will apply for non-US dollar denominated funds.
- Funds eligible for withdrawal will be made available within fifteen (15) business days of written request.
- Upon termination of the Employee’s employment or retirement, the Employee has various options including converting the account to a regular investment account and leaving the funds invested.
- LOM representatives are available to conduct educational seminars in house for Employees of registered Employers to assist employees with their risk profiles and investment fund choices.
- If your company is interested in the RSP, please contact the LOM CRM team to set up an appointment to discuss the RSP in detail and review the various agreements and documents.
The RSP is a preferable alternative to using the pension providers. It is ideal for any company with non-Bermudian employees, whether they are currently in an unregistered or registered pension scheme.
Call LOM today at 441-296-7283 to find out more!
LOM Asset Management Limited is licensed to conduct investment business by the Bermuda Monetary Authority.