Institutional Pension Funds

Tier 2 – Occupational Pension Scheme

According to the National Pensions Act (Act 766), occupational pension scheme means a pension scheme that is work-based, established under a trust which provides benefits based on a defined contribution formula in the form of a lump sum.

The second-tier is also mandatory and it is 5% of basic salaries of employees. The second-tier provides a lump sum payment upon retirement or death.

However, the accrued benefits of a member in an occupational pension scheme shall not be attached in execution of a judgment debt or be used as a charge, pledge, lien, or be transferred, assigned or alienated by or on behalf of the member, but can be used by employees to secure mortgages.

Tier 3 – Provident Fund Scheme And Personal Pension Scheme

The third-tier is voluntary, but is supported by tax benefit incentives if the scheme is registered with the National Pension Regulatory Authority. It deals with provident funds and other personal pension schemes.

The personal pension scheme is not only a retirement benefits scheme, but alternatively (or additionally); it is a potentially tax-efficient investment vehicle with restricted maturity dates.

Provident Fund Scheme – Group / Institutional

A Provident Fund is a fully-funded defined contribution scheme in which funds are managed privately and benefits paid as lump sum to the employee or his dependants in case of death. It is “a scheme governed by a trust to which a contributor or the contributor’s employer or both contribute to a pension scheme which provides benefits based on a defined contribution formula”.

Group Personal Pension Scheme means an arrangement made for the employees of a particular employer to participate in a Personal Pension Scheme on a group basis, and not as a separate Scheme; merely a collecting arrangement.

The provident fund pays lump sum money on termination of service, death or retirement. If registered, the benefits can only be accessed after ten (10) years.