Process for joining a pension fund
Voluntary funded component
Pension fund Pension fund is an investment fund with the main goal of securing pension for the people. In the pension fund investors (founders) can be: Individuals Employers Both at the same time (Joint schemes) 3
Pension fund types Voluntary component participants may choose one of the following funds: Up to 50% of assets Investments are Up to 25% of assets may be invested in prohibited in may be invested in equity equity equity 4
Where to apply for acquiring a fund unit? To acquire pension fund units it is necessary to: Apply to an intermediary entity, Apply in person at the office of the fund manager. The fund manager implements activities of fund management including recordkeeping of fund participants. After becoming familiar with the investment goals of the participant, the fund manager discloses pertinent information about the funds under its management, based on which the participant makes an appropriate selection. 5
Joining a fund
How to join a pension fund All participant (individuals or legal entities) activities with regard to the pension fund are done through the fund manager. These activities are: Opening a pension account (joining a fund) and fund selection, Payment for acquisition of fund units (fund manager issues the units) Exchange of fund units (if participant wishes), Redemption of units (or transferring the units to another fund manager), Receiving reports from the Fund manager. 7
Joining a pension fund In order to join an investment fund, the person has to apply to the Fund manager (registrar) and open a pension account. The application for opening a pension account contains participant’s: In case of legal entity In case of individual list of employees with their personal data, personal data, preferred method for receiving preferred method for information, receiving information, bank account number, bank account numbers for contact information and employees, address. employee contact data and address. 8
Joining a pension fund The process for joining a pension fund (becoming a participant) ends, when the participant receives a pension card. Pension card contains all the information in the application form and most importantly an identification number. An identification number is a special nine-digit code, which is used to identify all participants’ activities from then on. 9
Fund unit issuance
Issue of units The participant submits an application for unit issuance to the fund manager. After submitting an application the participant: Individuals Legal entity makes a transfer to an provides a list of participants appropriate account in the and information about their custodian bank, monthly contributions, makes a transfer to an appropriate account in the custodian bank. 11
Issue of units The Fund manager every day publishes prices for its fund units and if the participant has submitted an application for unit issue before 14:00 then units are issued at a price published on next day at 12:00. otherwise, the units are issued at a price published at the same time on the following second day. 12
Issue of units After issuing fund units, Fund manager provides a report to the Participant (personally or through the Employer, whichever method Participant prefers) regarding the issuance process and issued units. As soon as misinformation is detected in the report, it is immediately corrected. After the correct report is provided, the issue of units is completed. 13
Issuance process Participant Step 1 Step 2 Application Transfer of funds Step 3 Order acceptance notification Fund Custodian manager Step 5 Reporting Step 4 Issuance 14
Exchange of units
Exchange of units Pension fund participants can exchange their pension fund units for units of other pension funds either managed by the same fund manager or another fund manager. There is an exception for participants of employer schemes who are entitled to such rights in the following cases: After termination of employment with the employer, After liquidation of the employer, After termination of the contract signed between the employer and the fund (Manager). The fund manager may charge a certain fee during the exchange, but not exceeding 1.5% of the exchanged unit value. 16
Exchange of units For exchanging units, a Participant: First, receives information about available units from the fund manager, Then, submits an application for the exchange to the Fund manager in person or through the Employer. The application should contain: Participant’s personal data, The units and the number to be exchanged, The name of the fund for which the participant wants to exchange his/her units. 17
Exchange of units Participant Step 1 Application Step 2 Order acceptance notification Fund manager Step 4 Reporting Step 3 Exchange 18
Redemption of units
Redemption of units Pension fund units are the property of the participant which he/she can: Join another fund manager by redeeming fund units. Receive it after reaching the retirement age by choosing a preferred method. Receive accumulated funds before reaching the retirement age in the form of a lump-sum payment after 2 years of participation. From 2 to 10 years additional redemption fees or penalty charges may apply , with the exception of cases specified by legislation (terminal illness, disability of first degree, etc.) 20
Redemption of units The Participant starts the redemption process of his/her fund units by applying to Fund manager The application should contain: Participant’s personal data, Units to be redeemed and their number, Preferred redemption method. The Fund manager provides an order confirmation to the Participant after receiving the application, which is checked by the later. 21
Redemption of units The units are redeemed by the reported redemption price which depends on the time redemption application was submitted. The rules specified for determining unit price during issuance process also apply here. After redemption the fund manager provides a report to the Participant (in person or through Employer: as Participant prefers) regarding the redemption process, type and number of redemption units and charged fees. 22
Methods for receiving redemption funds After the redemption of units, a participant can choose one of the following methods for receiving the funds: Lump-sum payment Annuity payment Periodic withdrawal 23
Payout methods Upon retirement the participant can elect one of the following options for receiving his/her pension: Lump-sum payment – in this case the participant receives accumulated funds in one single payment and leaves the fund, Annuity – in this case Fund manager transfers accumulated funds on participant’s account to an insurance company, from where he/she receives a perpetual pension, Periodic withdrawals – in this case the Fund manager secures the fixed payments (for a certain period): regularly redeeming part of the units. 24
Redemption process Step 5.1 Pension Participant Step 4 Transfer Step 1 “lump-sum Application payment or Step 5 pension” Transfer of money for Step 2 annuity Order acceptance notification Fund Step 6 manager Reporting Step 3 Redemption 25
Reporting
Receiving reports Fund manager sends periodic reports to the participant regarding: Transactions made by his/her units, Transaction fees, Profit registered due to the changes in unit price. Participant receives reports by his/her preferred method: by post, e-mail or in person, in a preferred language (Armenian, Russian, English). 27
Ethics of service The fund manager in rendering investment management services strives for: Transparency and affordability, Convenience for the clients, Time-efficiency for saving client’s time Within the bounds of ethical norms. A similar approach has been adopted by “Capital Asset Management“ for all the participants of funds under its management. 28
Thank you!
www.capitalfunds.am 30
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