Government to Proceed With Phase Two Reforms of Pensions Act This Year

Photo: Mark Bell Minister without Portfolio in the Ministry of Finance and the Public Service, Hon. Fayval Williams (second left), converses with (from left) NCB Insurance Company Limited (NCBIC) executives, Business Development Manager, Desmond Johnson, and Managing Director and Chief Executive Officer, Vernon James; and Jamaica Information Service Director for Human Resources, Bernita Locke, during NCBIC’s pension funds seminar at The Jamaica Pegasus hotel, New Kingston, on Tuesday (May 29). Mrs. Williams was the keynote speaker. The seminar was held under the theme ‘Governance for Pension Funds: A Jamaican Perspective’.

Story Highlights

  • Minister without Portfolio in the Ministry of Finance and the Public Service, Hon. Fayval Williams, says the Government plans to proceed with phase two reforms to the Pensions Act and the attendant regulations, during the 2018/19 fiscal year.
  • She made the announcement while addressing NCB Insurance Company Limited’s pension funds seminar, which was held at The Jamaica Pegasus hotel, New Kingston, on Tuesday (May 29) under the theme ‘Governance for Pension Funds: A Jamaican Perspective’.
  • Mrs. Williams said principal among the proposed amendments are portability, which will enable members of an approved superannuation fund or retirement scheme to transfer their benefits to another, if they change employers; and vesting after five years, wherein a member shall, after that period of time has elapsed, be entitled to benefits based on employers’ contributions.

Minister without Portfolio in the Ministry of Finance and the Public Service, Hon. Fayval Williams, says the Government plans to proceed with phase two reforms to the Pensions Act and the attendant regulations, during the 2018/19 fiscal year.

She made the announcement while addressing NCB Insurance Company Limited’s pension funds seminar, which was held at The Jamaica Pegasus hotel, New Kingston, on Tuesday (May 29) under the theme ‘Governance for Pension Funds: A Jamaican Perspective’.

Mrs. Williams said principal among the proposed amendments are portability, which will enable members of an approved superannuation fund or retirement scheme to transfer their benefits to another, if they change employers; and vesting after five years, wherein a member shall, after that period of time has elapsed, be entitled to benefits based on employers’ contributions.

There will also be a structured payment arrangement that guarantees a series of fixed or variable payments for the life of the pensioner, and concurrent membership being facilitated in both a superannuation fund and retirement scheme or multiple schemes, once the total contributions do not exceed the limit prescribed by the Income Tax Act.

These, she pointed out, are among the amendments that stakeholders have been lobbying for in order to foster the local pension industry’s sustainable development.

The Minister said the overarching goal of the reforms is to increase the percentage of the employed labour force having a private pension or retirement scheme to a significantly higher number.

She pointed out that, currently, only about 117,000 of the 1,206,600 persons comprising the employed labour force have such an arrangement.

This, Mrs. Williams said, equates to 9.5 per cent, while noting that private pension assets totalled $521 billion as at December 3, 2017, which represented 25 per cent of Jamaica’s gross domestic product.

She pointed out that when the current level of private coverage is added to the Government’s pension arrangements, the total figure “would take us up to about 16 per cent of the employed labour force”.

The Minister noted that pension coverage in other countries globally is “really high” compared to Jamaica.

Among the countries with the highest levels, she informed, are the Netherlands – 91 per cent; Austria – 86 per cent; and United Kingdom –70 per cent.

Additionally, Mrs. Williams said that across the Caribbean the coverage ranges between 50 and 60 per cent, while emphasising that “we have a lot of ground to cover” in order to get to this level.

Noting that different countries use varying approaches to encourage pension savings, the Minister said the voluntary methodology, with accompanying tax incentives, is utilised in Jamaica.

Mrs. Williams emphasised that growing pension savings are pivotal to capital market development and have a positive impact on economic growth. This, she noted, by increasing savings and, by extension, the availability of long-term capital for investments.

“Research shows that with accumulating assets and the longer-term nature of their liabilities, pension funds have incentives to invest more in illiquid and long-term assets that yield higher returns for their members, thus helping their members to stay ahead of inflation and have the prospects of a sustainable and decent pension in retirement,” she noted.

This, the Minister added, would result in a pension arrangement retaining its adequacy for up to 15 years into retirement.

Consequent on this, Mrs. Williams said the Government is committed to maintaining a low rate of inflation, deemed “our biggest contribution”, to ensure that pension savings “are not quickly eaten away”.

JIS Social