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State Minister for Finance and Planning, Fitz Jackson, has said that a statutory review period would be instituted for the 2004 Pension Act in the second phase of the reform process, in order to continually improve the effectiveness and utility of the regulatory provisions.
“We are going on new grounds; we don’t know what exactly we are going into and therefore we have committed ourselves by law, to look and re-look at ourselves, how we have been doing things, and what changes we need to adopt to make the regulatory provisions more friendly and more effective for all concerned,” Mr. Jackson said.
He was addressing the West Indies Trust Company Limited (WITCO)-organised seminar on Friday (Feb.17) at the Knutsford Court Hotel in Kingston, to address concerns of industry players resulting from the pending implementation of the new pensions regulations.
The Finance State Minister told the meeting, that further amendments were to be made to the Act, to allow for the removal of criminal sanctions for trustees, an issue, which has been of major concern for trustees in the industry. He said that Cabinet had instead, agreed to put in place a body of civil penalties.
The Act will also be amended to remove the requirements of securities dealers’ licences for self-administered pension funds. Mr. Jackson said that this provision was in recognition of the fact that about half of the industry was dominated by self-administered funds and they have demonstrated good practices in the management of the funds for the most part.
The two amendments will be taken simultaneously with the passage of changes to the regulations.
The Finance State Minister said that the objectives of the pension reform process were to provide for: greater scrutiny of the management of pension funds throughout the country; sound governance systems in the pensions industry; protection for members; and social policy objective.
He pointed out that the reform agenda now being pursued represented the final leg of the restructuring of the financial sector initiated by the Government in the mid-1990s, with much already accomplished in the areas of banking, securities and insurance.
He noted however, that the reform process has taken longer than expected. “It’s late, it’s too long delayed; where we are now we should have been years ago.much of the delay was consumed in trying to build consensus among stakeholders because there is a high level of volunteerism,” Mr. Jackson said, pointing out that the second phase of the reform process had been delayed because of preoccupation with the regulations.
Meanwhile, Group Managing Director of the National Commercial Bank Patrick Hylton, said the reform of Jamaica’s pension system, now being pursued, was a commendable move. “Comprehensive reforms should serve to strengthen our pension system and ensure that workers can count on the benefits they have been promised; the consequences of inaction can be devastating,” Mr. Hylton noted.
He said the practice of workers accessing their funds before retirement was not to be encouraged. “The pension fund is not a savings account. It has to be treated in such a way that there will be funds available to sufficiently support the pensioner during retirement,” he pointed out.
The pension regulations, which will be laid in the Senate for approval shortly, is expected to transform the practice of pension fund management and trusteeship in Jamaica and will herald the commencement of the regulation of the pension fund industry by the Financial Services Commission.
This legislation will require Trustees as well as Administrators and Investment Managers to be registered and licensed under the Act as well as provide for the introduction of government and investment regulations, to ensure the prudent management of pension schemes.
The pension funds industry plays a significant role in the financial services sector and is the largest mobilizer of long-term funds. The sector currently manages assets in excess of $100 billion, on behalf of 800 pension schemes, with a membership of 70,000 contributors. Implementation of the Pensions Act 2004 will complete the regulatory framework to incorporate all segments of the financial services sector.
The reform process was initiated in 1994 with a Green Paper being laid in Parliament. A subsequent White Paper was laid in 2001.