By David I Rumsey, 3D Global

 

Tax allowances on savings schemes are encouraging many individuals to set up their own pension plans. In years to come this will reduce pressure on the state social security system and will give individuals much more control on how their money is invested.

There has been much debate recently about how the government will resolve the problem of social security funding. There are 3 pillars of the social security system – the state, company provision and personal provision. In recent articles 3D has explained how the state system will be effectively bankrupt in less than 20 years and that many company pension funds in Cyprus are poorly managed.

The 3^rd pillar – Personal Pensions – is a new concept to Cyprus. However, in many Western European countries and North America, setting up a personal pension plan is common practice.

 

— Personal Pensions

 

A personal pension plan is a savings plan owned by an individual who makes regular contributions to build up capital for the future. On retirement, the capital in the plan is used to provide an income to supplement the state or a company pension.

A good personal pension will have the following characteristics: portability – it goes with you when you change jobs; flexibility – investment funds can be changed to suit market and personal circumstances; the plan will have a large range of investments – stocks, bonds, cash, property; tax-deductible – tax allowances as an incentive to save.

Pension plans are managed by fund management and insurance companies and are marketed through regulated intermediaries such as Banks, Investment Firms and Insurance Intermediaries.

 

— Foreign companies enter Cyprus market

 

Cyprus’ entry into the European Union has opened up the market to competition from foreign suppliers of pension and insurance products.

One company from the UK – Friends Provident Life and Pensions – has launched a tax-deductible savings plan: the UltimaSave. Ian Sturgeon, director of European sales comments “Cyprus is an interesting market for us; we believe the growth in savings and investments over the coming years will be substantial. Our products offer access to a wide variety of top-class funds from companies you can trust; our savings plan is tax deductible; and our products are highly competitive”.

Friends Provident, a FTSE-100 company, is 175 years old, manages 157 billion Euros and has 2.5 million customers worldwide.

The company is actively looking for distribution of its products in Cyprus through regulated intermediaries. Friends Provident and 3D Global (the Cyprus-based financial services group) recently received approval from the Insurance Companies Control Service. “We would also like to establish an association with a bank in Cyprus”, says Sturgeon who sees distribution of financial services products as being dominated by the banking sector.

As well as retirement provision, the UltimaSave may be used for school fees planning, mortgage repayment and general savings. In all cases, subject to certain conditions, the plan qualifies for tax deduction.

 

* For more information on the UltimaSave and other Friends Provident Products, contact 3D Global at [email protected] or on 25 82 82 92.