INVESTMENT OF OFFSHORE PENSION ASSETS







	Live Conference
	18:00 to 21:00 GMT

Investment of Offshore Pension Fund Assets

Pension funds will usually comprise a considerable amount of assets which in turn have to be invested to meet the employee requirements of the company concerned. Regular cash sums will also be contributed by the employer (and in some cases by the employees) and these sums must also be invested.

In general terms, the assets which comprise a pension fund should be invested with a long-term view and although the overall philosophy will be conservative there must be scope for capital appreciation in order to meet the future requirements of the members of the scheme, and indeed to cater for the addition of future members.

Many funds will also have current beneficiaries who will require regular distributions (such as a monthly salary) and as a result, there will be a need to ensure that the investments in those funds produce a sufficient level of income to meet the cash needs.

PRACTICAL ISSUES CONCERNING THE ROLE OF THE TRUSTEES

Although these general principles will also apply to the trustees of an offshore pension fund there are certain specific issues which the trustees of a fund should consider.

Duties of Pension Fund Trustees
In general terms, the trustee of a pension fund should make sure of the following;

That the contributions due from the employer and the employees are received and suitably invested;
That new members of the scheme are admitted in accordance with the terms of the trust ( and often in accordance with the employer's rules);
That benefits are paid on time to the members and that they are paid at the correct rate;
They must safeguard the assets of the pension fund;
They must act in the interest of the members (and future members) of the fund;
They must act impartially (e.g. they must act fairly between the members of the fund);
That accounts are prepared (usually at least annually) and if necessary submitted to the employer and other interested parties;
To exercise their powers for a proper purpose. (se the following)

Powers of Pension Fund Trustees
The trust deed will set out the powers which the trustee can, if he decides, exercise although as mentioned above the trustee is under a duty to exercise his powers only if the are for a 'proper' purpose. This would generally be for a purpose which is in the interests of the members and which is exercised in accordance with the terms of the trust deed.

It is worth mentioning again at this point that the trustee can exercise his powers 'if he so decides' because the trust will be a discretionary trust.

Some of the usual powers given to the trustees of an offshore pension fund are as follows;

To invest the assets as if they were the beneficial owners and if appropriate, to appoint an agent to assist them with this or any other management or administration unction;
To decide, in certain circumstances, who is to receive benefits, how much and when (e.g. on the death of a member of the scheme or the lump sum payable on the retirement of a member of the scheme);
To decide on pension increases;
To decide whether the terms of the deed require amendment or in extreme circumstances for the trust to be terminated;
To decide when and how new members (beneficiaries) are to be added to the scheme;
To decide how to treat and account for additions which may be made to the scheme from time to time (perhaps by the employer or sometimes by the employee).

Selection of a Trustee
In view of the fact that offshore pension funds are not usually subject to regulation offshore centres it is extremely important that the institution which wishes to establish a find appoints a reputable and experienced trustee. They should also check that the agents who are then appointed by the trustees are also suitably qualified and experienced.

A locally incorporated or locally licensed bank or trust company would often be an ideal choice of trustee and the administrator ain investment manager would often be a similarly licensed local institution.

The bank or trust company which is chosen would usually be of international standing and have operations in a number of offshore (and possibly onshore) locations. In view of the size of funds potentially under management it would also be reasonable to expect that the service provider chosen has a proven track record of high quality asset management.