Pandemic: End of Service Benefit (EOSB) planning is key

The UAE has rightly been praised for its efforts in combatting the local spread of Covid 19. Businesses have benefitted from the country’s pragmatic approach, which has put safety first while also ensuring that the wheels of commerce have continued to turn.

But even the UAE has not, of course, been immune to the impact of the pandemic; especially in respect of its role as a global aviation hub and tourism centre.

And for those who have lost jobs, whether or not they have received full settlement of their End of Service Benefit (EOSB) lump sum will generally have hinged on the funding approach taken by their employer. There is a stark contrast between those businesses that have made robust EOSB provision and those that have chosen to take a more ‘laissez faire’ approach.

With recent events having brought this issue into stark focus, for employers and employees alike, Sovereign has seen a noticeable uptick in the number of enquiries around ‘off balance sheet’ EOSB funding solutions.

Fortunately, we are well equipped to respond. We offer purpose-built trust-based solutions that allow responsible employers to fund for their EOSB liabilities fully and with a clear separation of the EOSB funds from the assets of the business.

The main reason for separating the EOSB assets from the employer’s business is to ensure that they will be available to pay out benefits whatever the current financial health of the business and are also ring-fenced from any potential actions by third parties, such as creditors or litigants.

Provisions within the trust deed ensure that money paid into the trust can only be used for the purpose intended – funding EOSB payments. An employer can further elect to invest some of the monies within the trust with the aim of achieving growth to reduce future funding costs.

For those employers seeking to attract, motivate and retain the best talent by offering a more generous employee benefits’ package, the EOSB lump sum can also be uplifted, perhaps subject to conditions such as minimum length of service thresholds or employee performance targets.

As well as EOSB solutions, Sovereign also offers a range of occupational pensions and savings plans that can be used as a top-up scheme or as an executive tier benefit.

Good regulation is essential to provide confidence, both to employers and to their employees, that the funds are being managed properly so that the scheme will be able to pay the benefits when they are due. That is why all Sovereign’s EOSB and pensions solutions are administered from its licensed and regulated trust offices in prime global jurisdictions such as Guernsey and the Isle of Man.