Umbrella Funds
An employer has two options when it comes to providing employees with retirement and other benefits. They can set up a stand-alone (also known as a privately administered) retirement fund, or they can choose to participate in an umbrella fund.
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Why Join an Umbrella Fund?
The two biggest advantages of belonging to an umbrella fund are:
To hand over the fiduciary responsibilities of running a retirement fund to a professional board, and
The cost savings of standardising many of the benefits and options, and the economies of scale that are achieved by splitting the “fixed costs” (like audit fees) across a larger group of members.
Stand alone Funds and Umbrella Funds.
What are the differences between a standalone fund and an umbrella fund?
Stand Alone Funds
Umbrella Funds
The employer
Sponsor
The commercial administrator
50% appointed by the employer
50% elected by fund members
Board of trustees
Appointed by the sponsor
May include independent/professional trustees
Appointed by the board of trustees
Service providers
Appointed by the board of trustees
Full flexibility – within legislated constraints
Benefit options
Usually a menu of standard options available to participating employers/sub-funds
Full flexibility – within Reg 28 limits
Investment flexibility
Full flexibility – within Reg 28 limits Investment flexibility Usually a limited number of investment managers and portfolios available to participating employers/sub-funds
Umbrella Fund Options.
Stand alone Funds and Umbrella Funds.
What are the differences between a standalone fund and an umbrella fund?
Stand Alone Funds
Umbrella Funds
Sponsor
The employer
The commercial administrator
Board of trustees
50% appointed by the employer
50% elected by fund members
Appointed by the sponsor
May include independent/professional trustees
Service providers
Appointed by the board of trustees
Appointed by the board of trustees
Benefit options
Full flexibility – within legislated constraints
Usually a menu of standard options available to participating employers/sub-funds
Investment flexibility
Full flexibility – within Reg 28 limits
Full flexibility – within Reg 28 limits Investment flexibility Usually a limited number of investment managers and portfolios available to participating employers/sub-funds