7 strategic benefits of workplace retirement plans

If you are a business owner and think retirement planning is something that you can put off, it’s time to reconsider.

Surely, it is a regulatory requirement you can’t ignore. Retirement plans can serve as a strategic tool for proactive financial management, risk mitigation, and fostering employee loyalty and security.

Here are seven benefits you should consider.

1. Unlocking tax advantages for your business.

The contributions made by your company to a qualified retirement fund are tax-deductible expenses. This means lower overall tax burden and improved financial efficiency for your company.

Second, the income generated by your retirement fund is tax-exempt, provided the plan is tax-qualified by the Bureau of Internal Revenue (BIR). For example, when funds are invested in specific fixed income investments or time deposits, earnings are not subject to a 20% withholding tax. Your fund grows more efficiently, and compounding potential is maximized.

2. Ensuring guaranteed, tax-free retirement for employees

Employees are assured of retirement benefits upon meeting eligibility criteria, such as reaching the age of 60 with at least five years of service. Your company may also decide to offer more generous provisions such as earlier retirement ages, for example, 50 years old and 10 years of service or even late retirement up to 65 years old, or vesting benefits at various service milestones.

Most importantly, benefits received by employees from a qualified benefit plan are exempt from personal income tax, provided that the employee is at least 50 years old and has rendered at least 10 years of continuous service.

3. Streamlining operations and guaranteeing regulatory compliance

If you hire a professional trust banking company, you significantly reduce your company’s human resource administrative burden when managing the funds. You can depend on the experts to design, enhance, and administer your corporate pension plans according to your needs.

You also ensure that you adhere to laws such as R.A. 7641 (Retirement Pay Law) and R.A. 4917 (Three-Fold Tax Incentives). A trust company also protects the retirement assets from misuse or misappropriation, ensuring that they cannot be diverted outside employee benefit payment.

4. Maximizing fund growth through professional investment management

Highly skilled portfolio fund managers bring deep market expertise and disciplined strategies to help you achieve your financial goals — giving you peace of mind every step of the way.

Trust entities can act as co-trustees to enhance accountability, ensure competitive performance, and improve overall risk management.

5. Providing a comprehensive financial safety net and engagement for employees

Employees may also enjoy more than the retirement pay. Retirement plans can be a defined contributory or provident fund set-up that helps employees have personal accountability to their savings. Other plans may include provisions for benefits in cases of death, total and permanent disability, early retirement, and voluntary or involuntary separation.

Employee loan programs may also provide employees with loans at preferential rates. Insurance features in a retirement plan can also help address immediate financial needs and avoid financial distress.

Last, as part of the service, trust entities may offer financial wellness for employees to learn about basics in investments. Studies show that companies with comprehensive benefit programs helps employees stay loyal and engaged.

6. Executive program for business owners and legacy for key personnel

With the retirement plans in place, a trust banking company may extend wealth management services to business owners, executives, and other key personnel who have built substantial wealth. They can enjoy holistic wealth management that will help them with the preservation and distribution of their wealth.

7. Partnering with a trusted fiduciary expert

If you tap a trust entity you will also enjoy the highest standards of fiduciary excellence, which means you can be assured that the trust entity has a legal and ethical duty to act solely in the best interest of the organization.

Risks of conflicts of interest or mismanagement can be mitigated. There is transparency and accountability with accounting records and fund performance reports. Leading trust entities usually have proven expertise and leadership as can be seen from their experience and assets under management (AUM), which can run up to billions of pesos.

Win-win-win proposition

With corporate trust and retirement solutions, everyone benefits — you, your company, and your employees.

These solutions go beyond being a simple expense. They’re a strategic investment in your company’s long-term growth, operational efficiency, and reputation. At the same time, they support your employees’ financial well-being, helping you build a more committed and future-ready workforce.

WANDA BELTRAN is the Head of Account Management for Metrobank Trust with over 25 years of experience in providing estate planning solutions via Trust structures. She is also the Vice President and Director for Tax & Regulated Products of the Trust Officers Association of the Philippines or TOAP. A certified financial planner, Wanda is also a sought-after host and emcee.

(Disclaimer: This is general investment information only and does not constitute an offer or guarantee, with all investment decisions made at your own risk. The bank takes no responsibility for any potential losses.)