Defined Contribution Retirement Plan

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Defined Contribution Retirement Plan
28th May 2008Ian Viney
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CIL Shareholders
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Defined Benefit Retirement Scheme(Benefit
Promise)

• The problems are universal
• Not limited to Egypt
• Recent estimates suggest the UK unfunded
  liabilities could be gt100 billion sterling.
• The liabilities are the responsibility of
  Employers (scheme sponsors)
• Who must solve the problem
• Employers (scheme sponsors)
• Regulators
• What are the solutions
• Get the scheme properly funded....or
• Liquidate the scheme and replace with DC
• Not easy but necessary
• Short term pain for long term gain

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Defined Contribution Retirement Scheme (Money
Purchase)

• Contributions defined according to the scheme
  rules
• Employer Contribution of salary
• Member Contribution of salary
• Payment of member benefits
• A Lump Sum on normal retirement
• Lump sum on early retirement or leaving service
• Guaranteed Insurance benefits
• Lump Sum on Death/Permanent Disability
• Risk transfer
• The member bears the investment risk..but
• Mitigate risk by investing only in low risk fund

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The Model
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Employee Retirement Benefit Plan

• Private Fund
• Decide benefit design
• Categories/Contributions/Vesting/Insurance
• Provide accurate member data
• Category of employment
• Names
• Dates of birth
• Occupation
• Salaries
• Transfer member entitlements
• Advise monthly adjustments
• Salary changes
• New members
• Leavers

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Sample Benefit Designs
Employee Categories Employee Categories Contributions of Gross Salary Contributions of Gross Salary Guaranteed Insurance Benefits Vesting Scales
Employee Categories Employee Categories Employer Employee Death Disability Vesting Scales
Staff 1 5 5 5 times gross salary 10 P.A
Supervisor 2 7.5 2.5 5 times gross salary 20 P.A.
Manager 3 10 2.5 5 times gross salary Full
Executive 4 20 0 7 times gross salary Full
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Employee Retirement Benefit Plan

• Administrator (CIL)
• Auto load data
• Individual member accounts
• Daily member account values
• Provide member statements
• Payment of benefits
• Select fund manager
• Comply with regulatory requirements

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Employee Retirement Benefit Plan

• Fund Manager
• Comply with fund objectives
• Strict adherence to investment guidelines
• Provide daily net asset values
• Performance measured against benchmarks
• Reporting to CIL investment committee
• Demonstrate strict control environment and risk
  management processes

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The Investment Fund

• Asset Class Mix
• Low risk
• Treasury Bills
• CDs
• Government Corporate Bonds
• Investment Objectives
• Steady Growth
• Secure
• Low Volatility
• Note Employees retirement savings must be Secure
• Low risk assets prudent responsible
• Exposure to equities must be limited

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Summary

• Administration burden outsourced
• Reward staff without increasing liabilities
• Transparency of member benefits
• Flexibility of design
• Superior investment performance

Demonstration of CIL admin system and capability
in booth.