7 Perks the Enwealth Umbrella Fund has for Employees and SMEs
An umbrella fund is a type of retirement benefits scheme that allows multiple employers to pool their employees' retirement savings into a single fund. This fund is then managed by a professional fund manager, who invests the funds on behalf of the members.
As you may have heard, the NSSF Act 2013 mandates employers to remit employees’ pensions in several tiers pegged on income levels. While Tier I contributions must be made to the NSSF directly, the Act allows employers who wish to pay Tier II contributions into a private scheme to opt out of NSSF on condition that they channel contributions to a private contracted-out scheme subject to approval by the Retirement Benefits Authority . Setting up a private pension scheme can be an expensive and complicated process for employers with smaller teams. This is where Umbrella schemes like the Enwealth Umbrella Fund come into play.
Here are 7 benefits of being in an umbrella fund.
1.????Pooling resources: An umbrella fund provides economies of scale. By pooling their resources, employers can benefit from lower investment fees and better investment returns than they would be able to achieve on their own. This is because the larger fund size allows for greater diversification and access to more sophisticated investment strategies.
2.????Lower costs: Joining an umbrella fund can be a cost-effective way for small and medium-sized enterprises (SMEs) to offer their employees a competitive retirement benefits package. Setting up a pension scheme can be a complex and expensive process, and many SMEs may not have the resources to do so. By joining an umbrella fund, SMEs can benefit from the funds established governance structure, investment strategy, and economies of scale, without the expense and administrative burden of setting up their own scheme.
3.????Retirement Security: An umbrella fund provides employees with greater retirement security. Many employees in Kenya do not have access to a formal retirement savings scheme, and those who do often have inadequate savings. By pooling their resources in an umbrella fund, employees can benefit from professional investment management and greater diversification, which can lead to higher investment returns.
4.???Attract and retain talent: Having an umbrella fund can be a way for employers to attract and retain talented employees. Offering a competitive retirement benefits package is an important factor in attracting and retaining employees, particularly in a competitive job market like Kenya's. By joining an umbrella fund, employers can offer their employees a high-quality retirement benefits package, without the expense and administrative burden of setting up their own scheme.
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5.????Tailor-made retirement benefits: An umbrella fund provides greater flexibility and choice for employees. Employees who join an umbrella fund can choose from a range of investment options, allowing them to tailor their retirement savings to their individual needs and risk tolerance. Additionally, if an employee leaves one employer and joins another, they can transfer their retirement savings from one employer's scheme to another without incurring any tax penalties. This portability of retirement savings is especially important in a dynamic labor market like Kenya's, where employees may change jobs frequently.
6.???Peace of mind and Security: joining an umbrella fund can provide peace of mind for both employers and employees. By joining an established and reputable umbrella fund, employers and employees can be confident that their retirement savings are being managed by a professional fund manager, in compliance with the law and the fund's governing documents. This can help to alleviate concerns about investment risk and ensure that retirement savings are being managed responsibly.
7.????Financial literacy: an umbrella fund can help to promote financial literacy and planning. By participating in an umbrella fund, employees have the opportunity to learn about investing and retirement planning, which can help them to make informed decisions about their retirement savings. This can also help to promote a culture of savings and responsible financial management, which can have positive long-term effects on individuals, families, and communities.
We invite you to contact [email protected] who can guide you on how to join the Enwealth Umbrella Scheme and enjoy these benefits. It is an effective way for employers and employees in Kenya to achieve their retirement savings goals and ensure financial security in retirement.
Gloria is the Business Development and Training Assistant Manager at Enwealth Financial Services Limited