Minister without portfolio with responsibility for the Public Service, Hon. Horace Dalley says that the groundwork to reform the public sector pension scheme has already begun.
Minister Dalley says the reform process is expected to yield a pension system that is more affordable for the Government, sustainable, and provides reasonably adequate retirement benefits.
Minister Dalley was speaking on the topic: ‘Pension Fund Reform: How Does Jamaica Benefit?’ at the Mayberry Investment Investor Forum held Thursday (January 24) at the Knutsford Court Hotel in New Kingston.
“The stakes in the pension reform process are high and the Government is fully aware of this. Therefore we are trying to develop a system that will be consistent with international standards and best practices, provide adequate benefits and will be sustainable as we attempt to reduce our debt to GDP (gross domestic product) ratio and to put the country on a path of sustainable development,” he stated.
He said this includes the development of an electronic business process, which will be implemented over the next two years.
“It will include the electronic delivery of information on pensioners as well as the calculation of pension benefits, this will lead to the reduction of the cost of administration and facilitate the gathering of data that will result in more reliable projections,” he informed.
Additionally, there will be an Omni Bus Pension Legislation that will underpin and harmonise the public sector pension provisions in Jamaica.
He noted that in charting the way forward, several key indicators must be achieved, including improvements in the administrative structure and the training of persons to become experts in pension administration.
“This will require specialist intervention utilising existing resource available both from the public sector and the private sector,” he pointed out.
Mr. Dalley said the development of an implementation plan in collaboration with the various stakeholders, which will cover the financial, legislative, communication, human resource, fiscal and actuarial aspects, is also critical.
The total number of pensionable public sector workers as at August 2012 stood at approximately 90,000. The Minister said it is projected that public sector pension payments will significantly increase in the upcoming years.
Providing a breakdown of the figures paid out over the years, he said in the 2009/10 budget some $14.725 billion was paid in pensions; $17.073 billion in 2010/11; $21.294 billion in 2011/12; and in 2013/14, it is projected to move to $24 billion.
“The current figures and subsequent projections indicate that the present system is becoming highly untenable and consequently has serious implications for already burdensome public debt,” he said.
“The reality is…we have no choice, International Monetary Fund (IMF) or no IMF, the Government of Jamaica must reform the present system, therefore there may have to be some compromise in arriving at a prudent solution, which would be beneficial to all.
“The Government’s pension fund is going to be one of if not the largest pool of funds to be placed under private fund management by fund managers and for investment in the Jamaican economy,” he said.
Last year, the Joint Select Committee on Pension Reform recommended that new civil service employees should begin paying a contribution of five per cent of their earnings towards their pension, as of January 1, 2013. It was also recommended that existing public sector workers should begin contributing to their pension in the new fiscal year of 2013/14.
The Committee also recommended that the Government retain the defined benefit model as it is felt that the benefits would be adequate and the operations of the new arrangement would be transparent and efficient, among other things.
The World Bank was engaged in 2005 to provide assistance in carrying out the diagnostics that are critical in reforming the public sector pension process.