Planning for a financially secure retirement is hard enough, but life often bowls a curve ball. The company retirement fund and group life policy is the best way a company can help.
By Jeremy Hawson, GCI Employee Benefits Divisional Manager
Participation in a group life scheme and retirement fund remains one of the most valuable employee benefits a company can offer, but they’re often overshadowed by more immediate benefits such as leave allowances, a company car and so on. But when it comes to helping employees achieve a financially secure retirement, group life and retirement funding is fundamental – especially when facing up to a major disruptive event such as death or disability.
In the normal course of events, the retirement fund will provide employees with the core of their retirement capital. It will seldom generate enough income to replace the working salary, but it will typically form the lynchpin of a more comprehensive investment strategy for retirement.
However, if the employee dies prematurely, is disabled or becomes critically ill, the family faces the challenge of replacing his or her income – long before the retirement plan has matured. Such highly disruptive events have the capacity to destroy or greatly constrain a family’s financial viability, with severe consequences for all members.
This is why it is so essential to have a retirement fund that is set up in such a way as to provide some form of death and disability-linked income that would, at least partially, replace the now-lost salary. A group life policy would provide a capital lump-sum in the event of death
The employee benefits service provider has a key role to play in this whole scenario. In the first instance, it must develop and then implement a strategy to build close communication – and ultimately trust – with the employees. This is critical in ensuring that they understand what the retirement fund and group insurance benefits are for, and that their contributions are in line with their responsibility and risk profiles.
As part of this process of building up a detailed picture of members and their needs, the employee benefits provider must help members ensure their affairs are properly in order. For example, if they have minors nominated as beneficiaries of their group insurance policies and retirement funds, it is necessary for them to have a will that makes provision for a testamentary trust.
The employee benefits provider also has a key role to play in assisting the company management. It must act as an advisor when it comes to choosing and then monitoring the investment houses who supply these products. Understanding the members’ needs and then matching them with an investment product is a highly specialised and detailed job. The investment suppliers and risk suppliers are reviewed each year in order to check that the most cost-effective rates and covers are being used, so a long-term relationship between the company and its employee benefits provider is preferable.
Another way in which the employee benefits provider can support management is by analysing the member data, and reporting on trends and potential problems. In this way, it supports a proactive approach that can only improve employee engagement and stability over the long term.
In short, retirement plans are important but they must include contingencies for the unexpected disruption. When it comes to providing financial security for employees, a well-designed retirement fund and group insurance benefits are critical.