Illustration: Colin Daniel

Participation in a group life scheme and retirement fund is one of the most valuable employee benefits a company can offer, but this is often overshadowed by more immediate benefits, such as leave allowances and a company car.

But group life and retirement funding are fundamental to helping employees achieve a financially secure retirement, particularly in the face of 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 their salary, but it will typically form the lynch-pin of a more comprehensive investment strategy for retirement.

However, if an 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 essential to set up a retirement fund that can provide some form of death-and disability-linked income that will, at least partially, replace the lost salary. A group life policy will provide a capital lump sum in the event of death.

The employee benefits service provider has a key role to play in this scenario. In the first instance, it must develop and 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 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 that their affairs are in order. For example, if they have nominated minors 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 a company’s management. It must act as an adviser when it comes to choosing and monitoring the investment houses that provide these products. 

Understanding members’ needs and matching them with an investment product is a highly specialised 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 improve employee engagement and stability over the long term.

In short, retirement plans are important, but they must include contingencies for an unexpected disruption. When it comes to providing financial security for employees, a well-designed retirement fund and group insurance benefits are critical.

Jeremy Hawson is the divisional manager of GCI Employee Benefits.