Unlock Your Potential - Freisenbruch

Do you want to make the most of your pension plan and maximize your retirement savings potential?

Being a financial advisor in Bermuda, I recognize the distinct hurdles that Bermudians encounter when it comes to saving for their retirement. With the elevated cost of living, saving an adequate amount of money to enjoy a comfortable retirement can be challenging. To tackle this, a defined contribution pension plan can be an essential tool for individuals to prepare for retirement and for employers to offer as an enhanced benefit to their employees.

A defined contribution pension plan is a retirement savings vehicle in which both the employee and the employer contribute a defined percentage of the employee’s salary into a retirement account. The contributions are then invested in a variety of mutual funds such as stocks or equity, bonds or fixed income, or money market funds. Your retirement income is based on the performance of the investments that you hold net of any fees incurred.

Unlike defined benefit pension plans that guarantee a specific amount of income during retirement, the retirement income from a defined contribution plan depends on the cumulative performance of the investments in the account. One of the primary advantages of defined contribution pension plans are their flexibility; individuals can choose the investments that best align with their personal goals and risk profile, and they can adjust their investments as their circumstances change over time.

In addition, these plans can help employers better manage their own retirement expenses. With a defined contribution plan, employers do not bear the responsibility of guaranteeing a specific level of retirement income to their employees; the retirement income is based on the performance of the investments in the account instead.

Another benefit of your pension plan is the potential to earn compound interest. Starting early and making regular contributions can help you make the most of this advantage – even small amounts can grow considerably over time. Additionally, making voluntary contributions provides a means to access unlocked funds when you need them. If you’re curious to see the potential growth of your savings over the years, check out our Retirement Savings Calculator here.

Earnings aside, there’s another good reason to carefully consider what your organization’s pension plan looks like. In today’s competitive job market, employees are looking for more than just a paycheck. They want to work for employers who value their contributions and provide them with opportunities for personal and professional growth. Offering a defined contribution pension plan as part of an organization’s benefits package can be a valuable tool for attracting and retaining top talent.

What’s more, offering enhanced pension contributions and custom investment options may also contribute to a positive work environment and foster employee goodwill. By making these opportunities available, employers can demonstrate their commitment to their employees’ long-term financial well-being and can provide an important benefit that sets them apart from other employers.

It’s worth noting that defined contribution pension plans do carry certain risks. Similar to other investments, there is a possibility of the account’s value decreasing over time, especially during periods of market volatility or economic turbulence. However, investors, managers, and administrators of these plans strive to mitigate risks by consistently assessing, adjusting, and diversifying portfolio risks and allocations. This approach is aligned with both corporate and personal investment criteria as well as the guidelines set forth by the Pension Commission.

When it comes to choosing a pension provider for your workforce, it’s important to consider the following factors:

Conversion and onboarding speed
Investment performance
Level of associated fees
Market accessibility
Quality of administrative service and support (e.g., pension education, training, and tools)

Additionally, when establishing a new group pension plan, it’s vital to consider the impact of several factors on your employees’ overall financial well-being and satisfaction such as:

Age of enrollment
Eligibility criteria
Vesting periods

By assessing these factors carefully, you can select a pension provider that best suits your employees’ needs and maximizes their retirement savings potential.

Once an organization has a pension scheme in place, it’s crucial for you, as an employee, to recognize the benefits provided by your pension plan and to make the most of them. Your plan offers 24/7 online access to your portfolio, allowing you to update your personal profile and contact information, generate customer service requests, modify investment selection, and choose your retirement holdings from a diverse range of mutual funds. By purchasing units of investment that appreciate over time, you can increase your retirement savings potential. Furthermore, the plan is flexible and portable, which allows you to save and invest efficiently throughout each career transition. You’ll also want to understand the locked and unlocked natures of your pension contributions, which can provide added liquidity, and flexible payout options enabling you to preserve your funds responsibly throughout your retirement.

At the end of the day, retirement is an important consideration for every working-age adult. If you are an individual who is interested in learning more about how a defined contribution pension plan can provide stability and flexibility throughout your retirement or if you are an employer seeking to enhance your pension offering with reduce costs and increased support, we invite you to schedule a free pension consultation today!

For personalized advice, contact Rickai Binns, Financial Pensions Advisor at Freisenbruch.

Email rbinns@fmgroup.bm or call directly on (441) 294-4660 or (441) 538-1245