Why employers should consider joining Umbrella Funds

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By TKay Nthebe

Saving and planning for retirement can be a mammoth task for employees, especially with the increasing financial responsibilities e.g., taking care of the monthly expenses such as school fees, groceries, and utilities. Prioritising saving for retirement therefore often takes the back seat, leaving many employees with insufficient capital to retire finally secure.

Employers play a BIG role in changing this narrative, by offering benefits that will help employees better save and prepare for their futures. In this article, I discuss why employers should consider joining an Umbrella Fund.

What is an Umbrella fund?

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This is a retirement fund set up by a sponsor (usually an insurer) that affords different employers (small, medium, or large enterprises), across different industries the opportunity to join and participate in a fund under the same “umbrella”. Umbrella funds are managed by a board of trustees (BOT), with various skills and competencies. Umbrella funds can be a pension or provident funds – where both the employer and employee contribute towards the employee’s retirement benefit (commonly referred to as defined contribution fund).

How are Umbrella funds different?

Umbrella funds in Lesotho are governed by the Pension Fund Act of 2019 and Pension Fund Regulations of 2020. They differ from traditional standalone funds where a single employer sets up the fund for employees, is responsible for the administration costs and investment management of the fund (often required to source these services). Umbrella funds provide a lot more flexibility where participating employers, including small medium enterprises (SME) who previously did not have retirement funds can share resources and reduce costs because of the economies of scale due to the number of members.

Why join Umbrella funds?

As earlier mentioned, employers – big or small play a critical role in helping employees plan and save for their futures. Because of the competitiveness of the labour market, employers need to proactively offer great employee value propositions (EVP) that will help attract and retain top talent. By joining an Umbrella fund, employers can define their own rules and develop tailored investment strategies, enabling them to offer competitive employee benefits that include saving towards retirement and risk benefits such as group life assurance, income protection and disability cover. Furthermore, employers can leverage on the governance and compliance benefits offered by Umbrella funds, giving them time to focus on their core business.

As an employer, are you still not offering YOUR employees benefits?

It is an exciting time for the pension fund industry in Lesotho, an opportune moment for employers to take advantage of the changes and help their employees plan for their futures. With the number of financial solutions available, there is no excuse for not offering employee benefits. There are different Umbrella funds to choose from in Lesotho, offered by retirement fund administrators and insurance companies. For solutions that suit your employees’ retirement needs, employers can consider joining the Lesotho Employers Umbrella Pension and Provident fund. Visit Alliance Insurance for more information. Likhomo!