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Pensions Schemes

A General Introduction

When it comes to attracting and recruiting the best in your field, good pension provision can give you the edge in a competitive labour market. As well as providing financial security, offering a pension gives your workforce a sense that they have been recruited for a career, not just a job. In addition, creating pension provision within your company shows that you value your employees as individuals, even beyond their working lives. This could result in increased productivity benefits.

Occupational Pension Schemes

FINAL SALARY SCHEME

Under a final salary scheme, members get benefits in accordance with their contractual terms (typically a proportion of the final salary for each year that they have worked there). These are expressed as a pension value, but normally members can opt to reduce their pension by taking some of the money as a cash lump sum on retirement. In some circumstances the Government are allowing commutation of up to 100% which is currently available for defined-contribution pension schemes, will be extended to all approved final-salary pension schemes in Gibraltar.

The fund is monitored by Actuaries, whose job is to determine whether or not there will be sufficient assets to meet the pension payments. If the fund is doing well, the company, and in theory even the employees, might be able to reduce or stop their payments. If the scheme does badly (e.g., its investments fall in value) then the COMPANY is expected to make up any shortfall.

DEFINED CONTRIBUTIONS

Alternatively, an employer may set up a 'defined contribution' or 'money purchase' scheme. In this case, the monthly contributions are put into a fund earmarked for that particular employee, who, when he or she retires, is able to take a 25% tax-free lump sum and, with the balance, alternatively purchase an 'annuity'* or take the remainder 75% cash lump sum tax-free in lieu of the annuity. The Government are allowing commutation of up to 100% is currently available for defined-contribution pension schemes.

Company Pension Schemes can be set up as either Group Personal Pension Plans or Occupational Pension Plans. Contact Castiel Winser who will assist and advise you in order to tailor-make your Company Pension Scheme a reality.


*Annuities are sold by pension providers and insurance companies and guarantee the policyholder an income throughout his or her retirement.