Govt. Embarking on Phase Two of Pension Reform


State Minister in the Ministry of Finance and Planning, Fitz Jackson has said that the Government is now embarking on phase two of the pension reform process.
Speaking at a recent Think Tank at the JIS Head Office at 58a Half-Way-Tree Road, Mr. Jackson informed that, “the first phase of the pension reform agenda has been completed and the government is now embarking on the second phase.”
According to the State Minister, the reform process began in 1994 when concerns were expressed regarding the state of the pension industry in Jamaica and the need for regulation.
Following those expressions of concerns, he outlined, the government, through the Minister of Finance and Planning, established a Pension Reform Committee comprising various stakeholders, including the trade unions, private sector entities and government representatives.
The committee was charged with putting together a body of recommendations, which subsequently resulted in the compilation of a Green Paper and thereafter a White Paper, which was tabled in Parliament in 2001. The White Paper formed the basis of the pension agenda that the government sought to achieve.
“The reform agenda set out to establish some minimum levels of performance by all the participants involved in the management of pension schemes throughout the country,” Mr. Jackson explained.
Admitting that time elapsed between the recommendations and the regulations, Mr. Jackson noted that in 2005 the Superannuation and Retirement Schemes legislation came into being.
As a result of some reservations that evolved during that journey, the promulgation of the accompanying regulations was further delayed until 2006.
The intention of the regulations, he said, is to bring about a greater amount of predictability in respect to the quality of life of workers upon reaching retirement age.
Meanwhile, Executive Director of the Financial Services Commission (FSC), Brian Wynter, explained that some of the critical issues of the Pension Act that would be dealt with during phase two of the reform process, include the vesting of pension rights, portability of pension funds, as well as the lock-in of contributors’ compulsory contributions.
In terms of the vesting of pension rights, he indicated that there would be a specific maximum vesting period that must be in all pension funds. “The White Paper has indicated a maximum vesting period of five years and this, in fact, is shorter than what has been the norm,” Mr. Wynter said.
“Once you are vested, you are then entitled to what has been put into the particular fund and what has been earned in that fund during the time that you have been a member,” the FSC Head explained.
As for portability, Mr. Wynter indicated that, “the law will provide that individuals must also be allowed to move their pension entitlement to another pension fund when they change jobs or to a retirement scheme if their new job does not have a pension fund.”
Addressing the locking-in of contributors’ compulsory contributions, he explained that after five years, compulsory contributions would be locked-in to the respective fund. However, this would not affect contributors’ voluntary contributions.
“We believe that after the process is completed, we will have a more vibrant pension industry, which will contain a suitable level of competition between the service providers who are seeking to serve the pension industry and ultimately the members of pension schemes,” he said. This will help to foster greater confidence on the part of pension plan members in their pension fund.
“When persons are confident about their pension arrangements, they will maximize the opportunities that are provided to them through the tax advantages and therefore they will have a suitable and adequate pension when they retire,” Mr. Wynter said.

JIS Social