The policy would pay out a lump sum amount as agreed and set in the policy (i.e. one or two years’ salary) in the event of the death of a member (employee). It can also pay at a specified date (i.e. retirement age) if the member survives to such date.
The necessary provision for funding the scheme will be actuarially determined by us and the employer would be required to make such provision to the scheme. The funds would then be managed by us on the employer’s behalf in terms of investments and claims handling, for which we would charge an administration fee.
A group endowment scheme is not a risk transfer arrangement as with other insurances. It is a retirement fund which we manage on behalf of an employer and the employer has full discretion on how they wish it to operate.
The member’s rights, benefits, terms and conditions will be stipulated in the employer’s trust deed setting up the fund. The trustees will set the rules with regard to the running of the fund and as fund managers, we will administer the scheme in accordance with the provisions of the trust deed.
Multiple of salary for member’s death (i.e. 1x, 2x, 3x annual salary as required)
If the scheme will be non-contributory or in other words fully funded by the employer, then the employer has full discretion on the setting of the scheme’s benefits. It should be noted that contribution levels and administration expenses will increase proportionately with the level of benefits required. The best arrangement would be to insure the risk of death under a group life assurance policy and have the endowment scheme cater for retirement alone. This would be more cost effective and the scheme’s growth would be more stable as there would be less fluctuation in the fund levels caused by death claims.
We would be happy to meet you and the client to clarify these points further should this be necessary. We would also be happy to assist in setting the terms of the trust deed once the client is ready to place the scheme.