Important note: Information in this article was accurate in 2005. The state of the art may have changed since the publication date.
Sunday Times (Johannesburg) - July 3, 2005
Umbrella funds that are managed by independent, professional trustees could become attractive options for businesses seeking to reduce the burden of regulatory compliance.
Maron says these funds can spread the regulatory costs over all participants under the "umbrella", thereby reducing the financial burden.
These funds normally come bundled with life and disability cover for members, and in most cases they obtain this without needing to submit any medical evidence of health. Trustees do the work involved with selecting appropriate investment profiles and managers for each profile.
Maron said most umbrella funds were also flexible enough to grow with the company. "These funds can accommodate fairly low benefits initially and then, as the employer's affordability increases, so does the benefit level."
Large companies have long realised the need to provide comprehensive employee benefit packages with retirement savings and insurance cover. Even smaller businesses have had to do the same, for a number of reasons:
*Long-serving or injured employees may not be able to retire because they simply cannot afford to do so. The employer may then feel obliged to keep the person employed or offer a gratuity.
*Staff laid off due to changes in the needs of the business may leave with just the legal minimum because the employer, although concerned, cannot afford to supplement the package.
*When a staff member dies, dependants may look to the employer for ongoing financial support. This is happening more often with the increase in HIV/AIDS-related deaths.
The complexity of providing retirement funds may concern smaller organisations but Maron says there are ways to overcome this. A good intermediary could help make the correct choice of fund and recommend a suitable benefits structure.
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