The purpose of retirement Benefit Schemes is to make funds available to employees who have served an organization and retired. It is to ensure that they maintain a reasonable standard of living comparable to what they enjoyed while in active service.
The various types of Retirement Benefit Schemes administered by IGI are namely:
• Defined Contribution Scheme
• Defined Benefit Scheme
• Gratuity Scheme
Defined Contribution Scheme
Contribution into the scheme is defined from the onset and it is usually shared between the employer and the employees (contributory).
- A guaranteed rate of interest on the fund is usually given at the beginning of every year
- Yearly statement of account for each member of the scheme is given
- Benefit to be provided is the accumulated value of the employer’s and the employee’s contribution (i.e. total contribution plus interest) and it is subject to the rules of the scheme
- One master policy will be issued to the trustees to serve as evidence of the contract
Defined Benefit Scheme
In this scheme, the benefit promised is under the scheme that will determine the rate of contribution. This is currently the type of scheme in the Nigerian Civil Service.
• A global statement of account is given to the Board of Trustees yearly
• It is usually non-contributory i.e. the employer pays the total contribution
• The rate of contribution to provide the promised benefit is determined by an actuary through an actuarial valuation of the scheme. This rate of contribution is reviewed every 3 years to determine its adequacy
• Benefits are usually provided in the form of a series of payment made at regular intervals (Pension) and payable throughout life commencing from the date of retirement
• Benefit is sometimes guaranteed for 5 years or 10 years
• A master policy is issued to evidence the contract
This is a non-contributory scheme i.e. total payment into the scheme is borne wholly by the employer. Although gratuity payable to employee can be paid as at when liability arises by the employer. Sound system of accounting practice envisages providing for liability every year and claiming tax benefit.
- Offers attractive interest rates
- Fund starts earning interest from the date of contribution
- IGI renders actuarial services when necessary
- Preparation of Trust Deed and Rules and Membership Handbook to be handled by IGI
- Consideration administrative work is taken over by IGI on behalf of the employer