The roles, responsibilities and legal requirements for companies in Bermuda differ depending on the sector, the type of registration (exempt or local) and the workforce that is employed. Different companies can have different obligations, but the bottom line is that employees hired by these companies want the same benefits.

When it comes to pension plans, it is quite clear: if you are a work permit holder, you do not have to join the company pension plan (and with a lot of companies there is not even an option to join). Regardless of whether you or your employee retires here or abroad, the fact of the matter is everyone will retire at some point, and having dedicated retirement savings is key.

Here are some of the major advantages and disadvantages to having a pension plan dedicated to the members of your workforce who hold work permits:

Advantages

1. Equalisation of employee benefits across the workforce.
2. Contribution to an employee’s retirement goals.
3. Employee retention.
4. Portability and/or complete liquidation of pension assets upon termination.

Disadvantages

1. Additional corporate expense for member contributions.
2. Cost of filing an amendment to the existing pension plan rules to allow all employees into the plan.
3. Additional pension administration fee expense due to increased number of members in the plan.

The goal is retirement, and the strategy to get to retirement is saving. The decision to offer a pension plan for work permit holders is a corporate decision; however, if it is decided not to offer one, then making staff aware of their alternative options should be a key corporate responsibility.

Saving for retirement outside of a company pension plan can be done in one of two ways: by setting up an investment account and dedicating monthly savings, or by opening an individual retirement plan and dedicating monthly savings. Either method will work, but human nature dictates that you are less likely to withdraw money if the word “retirement” is linked to the account name.

As the best alternative for saving for retirement, we recommend an individual retirement account (at Freisenbruch-Meyer we call ours a PRP – Personal Retirement Plan). This plan allows an individual to put money aside in an individual account under their name for long-term retirement savings. They can set up a standing order each month with a fixed amount from their bank account and transfer it into their individual retirement plan. The money in the individual retirement account is then invested as per their investment election on the application form, and it has the flexibility to be changed from time to time based upon their time horizon and risk tolerance. It is important to note these funds are not locked-in, and once the work permit holder leaves the island, they can simply either transfer the retirement money to an overseas provider or liquate the funds and take the cash with them.

Retirement affects us all. Whether it is chosen or enforced, our corporate responsibility is to ensure all employees, regardless of their status, have the tools to save for their retirement.

Carla Seely is the Vice President of Pension and Investments at Freisenbruch-Meyer. If you would like any further details, please contact her at [email protected] or call +1 441 297 8686.

This article was featured in the May 2018, RG Business Magazine.

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