Financing Employee Benefits

The financing and costs related to occupational pensions and employee benefits are too important to be taken lightly by an employer.

It is not enough to know which premium or contribution to be paid at a given time. Financing and cost goes much further, and takes into account the long term cost and liabilities. But not only cost but more and more the short term and long term cash flows play an important role in the financing of employee benefits.

We use creative thinking, innovative tools and bespoke models to give you a fresh approach and clear insight in the important elements of the funding of and investments for your employee benefits.

Risk management in the financing of employee benefits

Risk assessment and management is also an important factor in the financing of pensions and employee benefits. It covers a wide range of elements:

  • Demographic factors such as
    • longevity risk in case of pensions or other, for instance deferred retirement benefits
    • Mortality risk for life cover, morbidity/disability risk for disability cover
    • Medical risk in case of health care cover
  • Economic factors such as
    • Investment volatility/risks related to investment strategy and others
    • Future inflation, salary evolutions and related
  • Other factors related to employment such as turnover, employment rate and others

Other aspects in the financing of employee benefits

As such, the financing of employee benefits is a complex matter and should take into account considerations that include:

  • Strategy and objectives of the company including approach with respect to risk, all this combined with the local legal and regulatory environment
  • External or internal funding, and in case of external funding which funding vehicle. This goes from funding an insurance company or a pension fund, trust or IORP (Institution for Occupational Retirement Provision). For instance, choosing an insured plan implies often developing a long term relationship with an insurance company and choosing insurance companies is an art on its own. Indeed, comparing different offers of insurance company and the negotiation of your insurance contract requires in depth knowledge and experience in the insurance business, insurance techniques and in insurance terms and conditions
  • Which investment strategy to be taken and how selecting the right investment manager. Indeed, the total cost of your scheme or retirement benefits will mainly depend on the financial return of the invested funds. The importance is to find the right balance between return, security and liquidity
  • Use of risk management options ie reinsurance or related

We have in-depth experience in these matters and have the necessary modelling tools to model cash flows, long term costs of employee benefits and related financial and risk elements.

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