HISTORY OF THE ISASA PENSION SCHEME AND PROVIDENT FUND
In the early 1970’s, the then Association of Private Schools resolved to establish a group pensions and life assurance scheme for the purpose of providing benefits on retirement and ancillary benefits on death, disablement or resignation, for staff of private schools which elected to participate in the Pension Scheme.
A Deed of Trust was entered into on 27 March 1974 and the Private Schools Pension Scheme commenced operation with provisional registration on 1 July 1974 when three schools elected to participate. The permanent registration of the Pension Scheme was granted on 10 April 1980 by the Financial Services Board “FSB” and the Private Schools Provident Fund was granted permanent registration on 13 February 1987 by the FSB. The name change of the Funds to the Independent Schools Association of Southern Africa Pension Scheme and Provident Fund respectively was approved by the FSB on 22 January 2002.
The Pension Scheme and Provident Fund are managed by a Board of Trustees and administered by Old Mutual Corporate.
The Trustees endeavour to ensure that the overall package of benefits provided by the Funds meets the needs of the members. These benefits are kept under close review by the Trustees and improved from time to time, in order to maintain the Funds in a modern, relevant format.
The Pension Scheme consists of two parts, Part I being a defined benefit arrangement and Part II a defined contribution arrangement.
In a defined benefit arrangement, the benefit due to a member on retirement is determined by a formula set out in the rules of the Scheme. The formula is based on the member’s salary at retirement and the years of service in the Scheme. The member pays a fixed percentage of salary to the Scheme and the employer pays the balance of the cost required to provide the benefits promised to members. At retirement, a maximum of one third of the benefit can be taken in cash, whilst the balance must be paid in the form of a monthly pension.
In a defined contribution arrangement, the member and the employer contribution rates, as a percentage of the member’s salary, are fixed and defined in the Rules of the Scheme. The member’s retirement benefit is equal to an accumulation of the member and employer retirement contributions, increased by net investment returns. At retirement, a maximum of one third of the benefit can be taken in cash, whilst the balance must be paid in the form of a monthly pension, which may be purchased from an external insurer.
Each school has the option to elect to participate in either part.
A third option available to schools is the Provident Fund. The Provident Fund is also a defined contribution arrangement, but unlike the Pension Scheme, the Provident Fund is permitted to pay the entire benefit at retirement in the form of a cash lump sum. The Provident Fund was therefore established for those schools that prefer offering their members the flexibility of receiving the entire retirement benefit in the form of a cash lump sum.