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Financial needs continue in old age and / or after retirement and therefore one needs to be well prepared.
A pension scheme is an arrangement designed to provide income in such an eventuality. One can start a pension scheme as an individual or as a group. Where one is employed, the employer may also contribute on behalf of the employee. Pension schemes enjoy tax reliefs.
CHANGES AFFECTING PENSION SCHEMES CONTAINED IN THE FINANCE BILL 2010/2011
We are pleased as your pension fund administrators to bring to your attention a number of changes contained in the finance bill 2010 / 2011;
1. CHANGES TO THE RETIREMENT BENEFITS REGULATIONS
Appointment of Administrator-Related Service Provider
- Schemes that have appointed external administrator must ensure that the administrator is independent and not associated in any way with the contracted fund manager and vice versa, this is effective 11th June, 2010
Payment of Retirement Benefits
- Trustees are now required to pay members their retirement benefits within a period of 30 days. Benefits paid after 30 days shall be paid with interest, this is effective 11th June, 2010
Appointment of Chairperson of the Scheme Board of Trustee
- Schemes whose current chairpersons are either the Chairperson of Board of Directors, Chief Executive or Scheme Administrator are required to ensure re-election of chairpersons of the board from among the other trustees. This is effective 11th June, 2010.
Trivial Pension
- The minimum basis for the determination by the Retirement Benefits Authority of the threshold for a pension to be declared trivial and thus commutable into a lump sum has been reduced from two thirds (2/3) of minimum wage to 50% of the average minimum wage, this is effective 11th June, 2010.
Annuity Purchase Option
- Retiring members of Pension schemes do not have to purchase their annuity immediately upon retirement. Members can choose to purchase the annuity any time within a period of one year after date of retirement, this is effective 11th June, 2010.
2. PROPOSED CHANGES TO THE INCOME TAX ACT
Conversion of Gratuity Arrangement and Transfer of Gratuity Funds to a retirement benefits scheme;
- Companies paying gratuity to their employees will enjoy tax exempt treatment upon conversion and payment of gratuity equivalent to the years of the gratuity to a registered retirement benefits scheme, this will be allowed a deduction for tax on the same subject to a maximum limit of Kshs.240,000/- per year per member.
We will be explaining any points which may not be clear during the forthcoming board of Trustees meeting, however if you need a quick clarification, do not hesitate to contact us.
For more information please contact us:
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