Umbrella funds evolved in response to a need from smaller employers for cost effective retirement fund solutions. They are normal pension and provident funds in which multiple, unassociated employers participate, often offering a range of benefits on a packaged basis.
There are two types of umbrella funds in the industry: The first type of umbrella fund has one set of rules which sets out all the terms and conditions applicable to all the employers and which bind all employers equally.
The second type of umbrella fund has a set of general rules which sets out the main governing provisions relating to the fund. Each participating employer then has a set of special rules which set out the specific condition and benefit conditions applicable to their employees.
Umbrella funds are normally established by a service provider who appoints the initial trustees who are normally employees of the sponsor. The sponsor company is usually the appointed administrator and consultants to the scheme.
There is one board of trustees which manages the fund. This board is normally exempt from the Pensions Fund Adjudicator (PFA) Section 7A requirement - to have a board consisting of at least 50% member elected trustees. Some funds have appointed one or more independent trustees to the board. A practice has developed to introduce a second level of management through a management committee. The management committee would look after the interests of the members relating to a particular participating employer. The main trustee body delegates some of its functions to the management committee.
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