An occupational pension is a scheme generated by a company or organization for the benefit of its employees.

An employer, or group of employers, can choose to set up an occupational pension scheme to provide pension and other benefits for their employees when they retire.

Gibraltar Occupational pension schemes are usually defined by the type of benefit they provide.

There are three main types:

  • Defined benefit schemes (sometimes known as ‘salary-related’ or ‘final salary’ schemes);
  • Defined contribution schemes (sometimes known as ‘money purchase’ schemes); and
  • Hybrid schemes (mixture of defined benefit and defined contribution benefits).

Each of these can be funded by contributions from the employer only (a ‘non-contributory scheme’) or from both the employer and employee (a ‘contributory scheme’).

Defined benefit schemes

Schemes offered by employers that provide pensions for their employees based on the employee’s salary and years of service, are sometimes called ‘defined benefit’ or ‘final salary’ schemes. The employer contributes to the scheme and there are trustees who look after scheme members’ interests. You can only get salary-related pensions through an employer.

Defined contribution schemes

Schemes called ‘defined contribution schemes’ do not provide a pension based on salary or years of service, instead, they build up a pension fund that will be converted into an income when individuals retire. Usually, the employer contributes to the scheme and there are trustees who look after scheme members’ interests. When individuals retire, the scheme administrator will usually buy an annuity for individuals.

An annual statement should be given to scheme members showing how much pension income members might get based on the value of the pension fund as of that date, taking account of future payments into the plan, how the plan might grow, future inflation and pension income from the fund when members retire. These statements only provide an illustration of potential returns.

Schemes with over 100 active members who are persons currently employed and contributing to the scheme must be licensed.

An employer, or group of employers, can choose to set up an occupational pension scheme to provide pension and other benefits for their employees when they retire.

The firm should familiarize itself with the the Financial Services (Occupational Pensions Institutions) Act, 2006.

Role of the Trustees

Trustees must:

  • Ensure Investments are in line with the Statement of Investment Principles
  • Hold scheme assets securely
  • Ensure outsourcing is carried out properly
  • Act in best interest of beneficiaries
  • Give effect to trust deed and rules
  • Invest scheme assets or ensure they are invested adequately
  • Keep records and accounts of contributions to and from the scheme/give information
  • Collect contributions from the employer and employee
  • Invest them in accordance with the Statement of Investment Principles, or monitor that the investment advisor is doing so properly
  • Ensure that funds are protected
  • Ensure that the correct benefits are paid to the correct people at the correct time
  • Report to the relevant authorities on the financial conduct of the scheme.

Risk Management

The application should include details of how the trustees or any other person associated with the management/administration of the pension schemes conducts risk management, and in particular how the following risks will be mitigated:

  • That monies are misappropriated
  • That beneficiaries do not receive their full entitlements
  • That monies are not appropriately invested
  • That Defined Benefit schemes are not prudently funded to meet liabilities as they fall due
  • That members are not adequately informed about the scheme and there is lack of transparency
  • That the administration of the scheme is not effectively undertaken Member understanding/transparency
  • That trustees are not knowledgeable
  • That there are conflicts of interest
  • That bad advice is received from professionals
  • That an employer withdraws from a scheme without effective arrangements being put in place to protect the pension scheme
  • That Scheme assets/money is not adequately segregated
  • That fees and costs are unnecessarily high
  • That there is Insufficient Contribution Level
  • Investment risk / market risk (potentially having a significant impact on ability to accrue adequate pension benefits).

Statement of Investment Principles

The scheme statement of investment principles must:

  • Make clear who has responsibility for investment decisions
  • State the Investment objectives of the scheme
  • Set out the asset allocation strategy (Defined Benefit Scheme only)
  • Set out the types of investments that will be undertaken

Capital Requirements

There are no capital requirements for Pension Schemes.

The trustees need to ensure there is enough funding in the scheme to pay individual pensions in the future.

Why Valsen Fiduciaries

  1. We will advise you on the optimal legal structure for your requirements, size, expectations and circumstances. We have extensive knowledge of a wide range of legal structures in all major jurisdictions.
  2. Valsen will assist to complete every form for each process in the best way we know how (Based on our many years’ experience with various regulators and service providers across the world)
  3. Valsen will assist in preparation of winning business plans based on our superior understanding of regulator expectations and requirements
  4. We are very hands on in the post filing period checking with re regulator and service providers and updating you regularly. Any queries raised by the regulators and service providers during processing will be quickly synthesized by us and we shall craft the right responses to move the process forward fast.
  5. We can provide you with fit and proper directors in case you need. We have a wide network of qualified and experienced lawyers, chartered accountants, chartered financial analysts , Investment advisors etc. of international pedigree.
  6. We have a full in-house compliance support for all compliance requirements with the regulator and service providers
  7. Through our extensive network, we provide sign up services with major service providers including but not limited to; Liquidity providers, technology providers, custodians, prime brokers, legal advisors, auditors, payment gateway providers among others.