The world of executive and all-employee remuneration and the forms of incentive provided is ever changing and increasingly competitive. Rewarding, retaining and motivating employees and indeed winning new high profile executives over to your company requires a well structured and effectively administered remuneration package.

Bahrain is widely regarded as the best regulated financial centre in the Middle East with the largest concentration of Islamic Finance institutions. It plays host to more than 400 financial services providers.

Bahrain’s economy has grown at a fast pace in recent years and is now a key area for the recruitment, retention and motivation of employees. Regulations governing remuneration have developed to accommodate the need for financial institutions to promote staff remuneration and retention schemes.

The Central Bank of Bahrain (the “CBB”) issued a directive on 18th February 2009 (the “Directive”) relating to the voluntary establishment of Occupational Savings Schemes (“OSS”). The Directive establishes a frame work within which CBB Licensees must set-up and manage an OSS.

Ogier offers both the standard OSS for CBB Licensees as well as a more sophisticated savings vehicle for senior executives, a Pension Savings Trust “(PST)”.

Occupational Saving Schemes

An OSS is a scheme established by an employer for the purpose of providing savings benefits to full-time employees.

New standard conditions relating to the OSS are aimed at segregating and safeguarding saving schemes relating to employers both inside the Kingdom of Bahrain and abroad.

The OSS can be structured as an occupational plan on the basis of an agreement or contract between a specific employer and its full-time employees or a broader industry specific plan between employers and employees of the same industry.

The purpose of the OSS is to segregate and safeguard the employee funds in the scheme from those of the employer for the benefit of the employees. Establishing an OSS is voluntary.

If a CBB Licencee establishes an OSS to which it provides operator, asset manager, administrator or trustee services, the OSS must be registered with the Central Bank of Bahrain and comply with the conditions set out in the Directive.

Ogier can provide trustee, operator and administration services for OSS and will establish the appropriate asset management strategy depending on the rules of the plan. The OSS can therefore be more flexible and may not need to be registered with the CBB.

Establishment of an OSS

An OSS with a size of BD250,000 or more, set up by a CBB Licensee where a CBB Licensee acts as an Asset Manager, Administrator or Trustee, must be constituted as a Trust under Law No.(23) of 2006 regarding Financial Trusts.

While the assets of the OSS are held in the Trust, the Trustee must have the power to engage a full range of professional advisors to administer the OSS during its term. These might include custodians, fund managers, administrators, lawyers and auditors.

OSS Investment Requirements

The OSS must have a written investment policy acceptable to both the Trustee and the beneficiaries of the OSS. Broadly this should be of a low risk and expressly exclude financial instruments issued by the employer (or associated body). The investment policy should aim for capital preservation, diversification across sectors, and provide that the investment manager will refrain from borrowing or lending in the management of the OSS’s assets. The Trustee may lend to the participants in the OSS provided that this is permitted by the trust instrument and is in the best interests of the participants as a whole.

Unregistered plans do not have such investment restrictions and allow for investment in a suite of funds that best suit the needs of the beneficiaries.

Administration

The Trustee of a registered OSS must appoint external auditors and arrange for audited trust accounts (with a separate report addressing the compliance of the scheme with its investment policy) to be submitted to the CBB and the employer on an annual basis.

Comprehensive books and records must be kept by the Trustee of a registered OSS in Bahrain and participants must be provided with an annual statement of the OSS detailing the scheme’s performance, and any charges and fees. Unregistered plans do not require an audit, however this may still be regarded as necessary by the employing entity. Ogier’s clients benefit from specialist software to provide a proactive and efficient administration and reporting service to employers and beneficiaries alike. See below for more detail on the Ogier Group. Pension Savings Trust OSS are intended to provide a means of saving whilst in employment that can be augmented by the employer and which is invested in low risk financial instruments. This investment profile together with the fact that the financial instruments cannot be issued by the employer or an associated entity lend the OSS design to be for the benefit of short-term savers and is not intended to motivate or retain employees.

The Pension Savings Trust has the following characteristics:

  • Possibility of investment in employer issued financial instruments
  • Flexible investment choices with a risk profile that matches that of the employee
  • Longer term savings vehicle
  • Ex-employees can continue to save through the structure or transfer their savings to another employer’s Pension Savings Trust.
  • Wealth creation
  • Succession planning
  • Alignment of employee investment with those of the employer and its clients
  • Assets are remote from the employer’s creditors.

Conclusion

Ogier can provide a comprehensive service ranging from the preparation of plan rules, preparation of legal documents, the establishment and registration of the scheme through to the ongoing administration of the registered OSS in conjunction with Two Seas Trust. The forms of legal and plan documents which can be provided by Ogier have been used for many years in the provision of OSS services to Ogier’s European and US client employers.