[an error occurred while processing this directive]
3.3 Setting Up The Occupational Scheme
-
Only employees are eligible for occupation schemes; these may be
employees of companies, partnerships or sole proprietors.
-
There are a number of ways in which the trust may be established:-
- By a formal document known as a Trust Deed, which appoints
the trustees, and adopts a set of scheme rules. To speed things
up an interim deed is often used at outset, which contains sufficient
provisions for the scheme to operate until the Definitive Deed is
finished.
- By a Declaration of Trust. This is the usual route to establish
a trust for Executive Pension Plans. It is a simple document where
often the employer is appointed as trustee.
- By a board resolution. The trust may be established in
this way provided the necessary powers are contained in the company's
Memorandum and Articles of Association.
- By letters of exchange. Only suitable for individual arrangements
such as EPPs, the trust may be created by a simple exchange of letters
between the employer and the employee regarding benefits to be provided.
|
-
Whichever route is adopted, it is necessary also to appoint a scheme
administrator who is responsible for the day to day operation of
the scheme. Usually the Trustees or the company are appointed.
-
Once the necessary documentation has been received by the IR SPSS,
provisional tax relief will be granted on any member's contributions.
The majority of insurance companies have their documentation approved
by the IR SPSS as standard documents to speed the process of approval.
-
Schemes may be established either as a:-
- Final salary, or defined benefit, scheme, whereby the employing
company makes a promise of benefit related to salary. This may be
a flat percentage, or a formula, based on length of service; or
- Money Purchase, or defined contribution, whereby the company merely
makes a contribution relevant to salary level.
- The former benefit promise is an unknown quantity, as salary inflation
and investment returns are difficult to predict - high salary inflation
combined with poor investment performance in the fund could lead
to funding problems for the employing company.
- Money Purchase, on the other hand, is effectively a fixed overhead,
as contribution is linked to salary. Although still an expense,
the contribution is known as soon as salary increases are known,
and can be planned for at an early stage
|
|