ALEXANDER FORBES RETIREMENT FUND

Transcription

1 ALEXANDER FORBES RETIREMENT FUND (Pension Section) KENYA FOREST SERVICE Member's Information Handbook

2 INTRODUCTION The Alexander Forbes Retirement Fund ( AFRF ) provides valuable benefits for you and your family. This handbook is your guide to the benefits provided by the Fund and is designed to explain the main provisions of the Fund in a way, which it is hoped is easy to understand. This handbook is not a legal document and does not cover every aspect of the Fund. Full details of the Fund are set out in the Fund s Trust Deed and Rules which may be inspected on request and which will always overrule this handbook. The responsibility of managing the Fund rests with the Fund Trustees. In carrying out their duties, the Trustees take advice from professional advisors. The Fund is registered and approved under the Retirement Benefits Act 1997 and complies with all the provisions of this Act. The Fund is also approved by the Kenya Revenue Authority as a tax exempt Fund under the Income Tax Act (Cap 470). Page 2

3 Contents Page Terms you need to know 4 The Fund at a Glance 7 Membership 8 Contributions 9 Retirement Benefits 10 Death and Disability Benefits 11 Leaving Service Benefits 12 Income Tax Provisions 13 Miscellaneous Information 14 Contact Information 16 Page 3

4 TERMS YOU NEED TO KNOW Throughout this booklet, you will come across terms, which require explanation, and these are set out below. Please read them carefully. AFRF or Fund Alexander Forbes Retirement Fund (Pension Section). Deferred Member If you leave your Employer and you leave your Fund Credit or a portion thereof in the Fund, you will become a deferred member. Your benefit will continue to receive the same interest as contributing members until it becomes payable when you reach your retirement age. You will also continue to receive a benefit statement each year showing the interest that has been added to your benefit, as well as any other communication material distributed to members by the Trustees. As the Fund will need to communicate with you even after you have left, it is very important that you keep the Administrators informed of any change to your postal address. Dependants These are the people for whom you are legally and/or financially responsible for looking after e.g. your children, wife or husband, etc, but can also include other people who you voluntarily assist financially e.g. parents, brothers, sisters, etc. The Trustees will view all relevant circumstances when deciding on who receives your benefit, but they will take into account your wishes as recorded in your Nomination of Beneficiaries Form prior to finalising payment. Early Retirement You may retire on the last day of any month once you have reached the age of fifty (50) years. Your benefit will be calculated based on your Fund Credit when you retire. Please bear in mind that the earlier you retire, the smaller your Fund Credit will be. Employer Kenya Forest Service. Employer Portion This represents the net contributions paid by your Employer and the interest earned on these contributions. Page 4

5 Fund Credit Your Fund Credit is the total value of the assets held in the Fund on your behalf. It is made up of: All contributions paid into the Fund which have been allocated towards your retirement savings; and Any amounts transferred in from a previous scheme; and The investment returns (less expenses) made from investing the money. Insured Benefits This refers to the death benefit, disability benefit and last expense benefit provided in the Fund to members and employees of Kenya Forest Service. Management Committee The Management Committee is a representative body of employees who have been elected by the members and appointed by the Employer to ensure that the interests of members are preserved and that the Fund is managed correctly and professionally. The Management Committee meet every six (6) months. Member Portion This represents the contributions made by you and the interest earned on these contributions. Normal Retirement Age Sixty (60) years. This is the age at which you are normally expected to retire. Pension Section This is a pension fund. As a member of a pension fund, you may take up to a maximum of one-third of your retirement benefit as a cash lump sum. The balance of the retirement benefit must be used to provide a regular income (a pension) after retirement, payable at least for the remainder of your lifetime. Salary This is your basic salary or wages excluding any allowances. Service The period of your permanent employment with Kenya Forest Service. Page 5

6 Trustees The Trustees are responsible for managing the Fund. Their main responsibility is to ensure that the interests of all the Fund members and participants are protected at all times and that the Fund is managed in accordance with the Law and Trust Deed and Rules. Page 6

7 THE FUND AT A GLANCE How does the Fund work? Every month you will contribute a percentage of your Salary into the Fund. Over the period until retirement (or until you leave the Fund if earlier), your contributions, along with contributions paid by the Employer on your behalf that are allocated to your retirement savings, are invested in the Fund. Employee Contributions + Employer Contributions + Investment Return = Fund Credit Your Fund Credit will be invested by the Trustees and will grow broadly in line with the returns achieved each year on the investments. The value of your Fund Credit can go down as well as up. At retirement, the value of your Fund Credit may be used to purchase an annuity from a registered insurer. You can structure your annuity to meet your individual needs. Fund Credit = Optional Cash Lump Sum + Optional Monthly Income The amount of your benefits at retirement will depend upon four basic factors: 1. The level of contributions you make to the Fund that are allocated to your retirement savings. 2. The contributions that the Employer makes on your behalf that are allocated to your retirement savings. 3. The investment returns credited to your Fund Credit. 4. The rate at which your Fund Credit is converted to pension, if you choose to apply any part of your Fund Credit to secure a pension. This type of scheme is known as a defined contribution scheme. Page 7

8 MEMBERSHIP Who can join? Eligibility for membership varies from Employer to Employer. In the case of Kenya Forest Service, if you are in full time permanent employment, you will automatically become a member of the Fund. You may not leave the Fund while you are working for your Employer. This is one of the conditions prescribed by law that ensures favorable tax treatment of the contributions made by you and your Employer and the benefits payable by the Fund. How do I join the Fund? To join the Fund, you must complete an Application for Membership. You will be required to supply evidence of age or any other information as required by the Trustees of the Fund. Am I also a member of the NSSF? Your membership of the National Social Security Fund ( NSSF ) is in no way affected by being a member of the Fund. You and the Employer will still be required to pay the statutory contributions to the NSSF, but you will be entitled to all the benefits provided under the Fund. Page 8

9 CONTRIBUTIONS Your Contributions You pay 7.5% of your Salary into the Fund each month. Your contributions together with the returns made from investing these contributions, are referred to as your Member Portion. Your Employer s Contributions Kenya Forest Service pays an amount equal to 15.5% of your Salary into the Fund each month. The contributions, together with the returns made from investing these contributions, are referred to as your Employer Portion. How do I obtain tax relief? Your contributions are deducted from your Salary before tax is calculated which means that full tax relief is granted without the need to claim it. There are Income Tax limits on the extent to which tax relief is available on your contributions to the Fund. In addition, there may be tax implications for you if contributions exceed the limits on tax-deductible contributions to the Fund. You will be notified if you are likely to be affected by these limits. Can I pay more for higher benefits? Yes. These payments are known as Additional Voluntary Contributions ( AVC s ) and are a tax efficient way of providing extra retirement income. You can start paying AVC s on joining the Fund or at any other time. These contributions must be a fixed amount and must be made monthly. You will be able to vary these contributions annually. There are however Income Tax restrictions on the contributions that are tax deductible and you will be advised if you are affected. Page 9

10 RETIREMENT BENEFITS When can I retire? The Normal Retirement Age for the Fund is sixty (60) years. However, provided that the Employer agrees, you may retire at any time after the age of fifty (50) years, or earlier if you are in ill health. Also, if the Employer agrees, you may continue working after your Normal Retirement Age and retire at a date after your Normal Retirement Age. How much will my retirement benefit be? The benefits you will receive at retirement will depend on the size of your Fund Credit at the time of your retirement. Can I continue working beyond Normal Retirement Age? If the Employer agrees, you may continue working after your Normal Retirement Age. The Employer s contributions to the Fund will cease at your Normal Retirement Age. You may however continue contributing to your Fund Credit until you retire. Page 10

11 DEATH BENEFITS In the event of your death, while in Service before your Normal Retirement Age, your beneficiary (ies) will receive a benefit equal to: Your Fund Credit + a lump sum benefit equal to two (2) times your annual Salary. Nomination of Beneficiary Form A Nomination of Beneficiary Form is available from your Employer. This form, to be completed by you and returned to your Employer, serves as a guideline to the Trustees when making their decision on the distribution of death benefits. What benefits are payable should I die after retirement? If you are still a member of the Fund, a cash lump sum payment shall be made to your beneficiary (ies) equal to your Fund Credit. Who would receive these benefits? You should complete the Nomination of Beneficiary Form, which confirms the details of your chosen beneficiaries. What happens if I die whilst retaining a deferred benefit in the Fund? If you die after you have left Service with an entitlement to a deferred benefit but before you have attained Normal Retirement Age, the Fund will pay to your beneficiary (ies) a lump sum amount equal to your benefit retained in the Fund on leaving Service with interest to the date of payment. DISABILITY BENEFITS In the event of your permanent total disability through an accident while in Service before your Normal Retirement Age, you will receive a benefit equal to: Your Fund Credit + a lump sum benefit equal to two (2) times your annual Salary. Page 11

12 LEAVING SERVICE BENEFITS If you leave the Service of the Employer before your Normal Retirement Age, you will have one of the following options: To take a deferred benefit from the Fund payable from your Normal Retirement Age; or To take a transfer payment to another approved retirement scheme; or To take your own contributions with interest as a lump sum; and The Employer Portion of the contributions with interest will need to be preserved in the Fund until your retirement date or may be transferred to another approved scheme, a preservation scheme or a personal pension plan. In each case, the amount of the benefit will be equivalent in value to the sum of: The part of your Fund Credit representing the contributions which you have made to the Fund and interest thereon on that part of the Fund Credit; and A percentage of the part of your Fund Credit representing the contributions which the Employer has made to the Fund on your behalf and interest thereon on that part of the Fund Credit. The percentage is based on the number of years you have served with the Employer according to the following table: Years of Pensionable Service With Employer Percentage of Employer s Portion Less than 1 year of service 0% 1 year and more 100% You may choose the option to receive a transfer payment at any time before you reach sixty (60) years. You should note, however, that if you exercise this option, you would extinguish your rights under the Fund. If you have a retained benefit in the Fund and have attained the age of fifty (50) years or more, you may request the Trustees to pay the retained benefit before your Normal Retirement Age. Page 12

13 INCOME TAX PROVISIONS The Fund is approved by the Commissioner of Income Tax under the Income Tax Act (Cap. 470) The Income Tax (Retirement Benefits) Rules Provisions applying to Fund Contributions Under the current Income Tax regulations, the monthly Fund contributions that you pay (including any AVC s) are an allowable deduction from your gross taxable income up to a maximum of KShs 20,000 per month. This limit is periodically reviewed. Provisions applying to Fund Benefits The various benefit payments made to you from the Fund are tax exempt in the following manner: Pension payments The first KShs 180,000 per annum of pension received by a resident individual is exempt from tax. However the balance of pension in excess of KShs 180,000 per annum will be taxed under the normal PAYE system. Cash lump sum on retirement The first KShs 480,000 of your Fund Credit taken as a lump sum is exempt from tax provided you have completed ten (10) years of Service (pro-rated for less than ten years). However, the amount in excess of KShs 480,000 will be subject to tax. Lump sum payment on death to legal estate The first KShs 1,400,000 of a lump sum payment shall be deemed to be income not chargeable to tax as income of the estate or its beneficiaries. Lump sum payments on leaving Service The tax free cash lump sum is restricted to the lesser of the first KShs 48,000 times the number of full years of Service as a member of the Fund or the first KShs 480,000. The amount in excess of these limits will be subject to a withholding tax at prescribed rates. Page 13

14 MISCELLANEOUS INFORMATION Management of the Fund The responsibility of managing the Fund rests with the Trustees. The Trustees have a legal responsibility to protect the interests of members and pensioners at all times and to ensure that the Fund is operated in accordance with the Trust Deed and Rules. In carrying out their duties, the Trustees take advice from professional advisors. The Trustees, after taking professional advice, appoint external fund managers who are responsible for the investment of the Fund assets and a separate custodian to hold custody of the Fund assets. The Management Committee oversees the management by the Trustees and ensures that the interests of members and the Employer are maintained. The Management Committee reports back to the employees and Employer. Fund Constitution The Fund is governed by Rules, the detailed provisions of which are set out in the Fund Trust Deed and Rules. In the event of any conflict between the booklet and the Trust Deed and Rules, the latter will always prevail. A copy of the Trust Deed and Rules may be examined by contacting your Human Resources Department. The Fund is approved and registered under the Retirement Benefits Act 1997 and complies with all its requirements. The Fund is also approved by the Commissioner of Income Tax under the Income Tax Act (Cap 470) as an exempt scheme. Discontinuance of Contributions Whilst it is intended that the Fund will continue indefinitely, the Employer has the right to discontinue contributions to the Fund upon giving thirty (30) days written notice to the Trustees. Amending the Fund The Trustees and the Employer may amend the Fund documents from time to time without adversely affecting the accrued benefits of members. Benefits not assignable None of the benefits provided by the Fund can be assigned or used as security to guarantee a loan from any source. The Fund Trustees cannot recognize any purported charge or assignment and cannot consider or guarantee loans under any circumstances. Page 14

15 Benefit Statements In order to help you plan for your retirement, you will be given a statement setting out the value of your Fund Credit each year. Annual Report The Trustees will also produce an annual Trustees Report and Accounts, which will be audited by the Fund Auditor. The Trustees Report and Accounts will reflect the activities of the Fund over the previous twelve (12) months. A summary of the Report and Accounts will be provided to your Employer each year with your benefit statement. Can I change my nomination of beneficiary (ies)? At any time while you are a member, you may change or cancel your nomination of beneficiary (ies) to receive lump sum death benefits. It is important you keep your nominations up-to-date. The Retirement Benefits Authority (RBA) The Retirement Benefits Authority (RBA) is responsible for the regulation of all retirement benefits schemes in Kenya. The RBA has wide-ranging powers and may intervene in the running of schemes where the trustees, employers or professional advisors have failed in their duties. Page 15

16 WHO TO CONTACT WITH QUERIES If you have any queries regarding the Fund benefits, please contact Mr. Julius Olayo at Kenya Forest Service on (020) , or Alexander Forbes Financial Services on (020) or fax (020) or NOTES Page 16