Question 2:

Zaman Silam Bhd employs 500 individuals earning an average monthly salary of $3,000, with an average age of 30. The company plans to introduce an Endowment scheme as its primary pension scheme, with a 30-year investment horizon until the first batch of employees retires.

To fund the endowment scheme, the company will implement a salary deduction system allocating 50% of the required installment. These contributions will be invested to achieve a capital endowment sufficient to generate income covering pension payments equivalent to 50% of the anticipated average final salaries of RM10,000 in 40 years. A reputable fund manager has projected an average annual return of 6%.

Calculate the monthly installment required for Zaman Silam Bhd to fund the endowment scheme. Determine the monthly contribution each employee must make to the pension fund. If employees are given the option to participate in the company`s pension fund or establish their own investment fund, which option would you recommend and why?