Wykeham McNeill | Tourism workers deserve pensions
For many years across administrations, there has been an expressed desire for the dream of a universal pension scheme for workers in the tourism sector to become a reality. The need for it is inarguable.
Figures in 2013 showed that in the accommodations subsector, there were 33,938 Jamaicans directly employed. In 2015, there were only nine registered pension schemes, which covered 5,144 workers. In other words, only 15 per cent had employer-sponsored pensions. Therefore, 85 per cent of the workers in the sector were left to their own devices once they retired (of note, it is worrying that between 2006 and 2015, eleven hotels terminated their pension schemes).
In 2014, a number of factors aligned that increased the probability of this project becoming a reality.
First, a body of experts in the field of pensions, including Daisy Coke, Ravi Rambarran, Angella Fowler and St Elmo Whyte, were brought together to analyse the situation and determine how Jamaica might plot a way forward.
Among the weaknesses found was that a large majority of tourism workers fell below the tax threshold and, therefore, did not see any real tax benefits from investing in a pension scheme.
They pointed out that a major incentive of contributing to a pension scheme, apart from the long-term savings it represents, is that it is a tax-free investment. But because many of the workers were earning less than the taxable threshold, they were not paying substantial taxes anyway, and this made it less attractive for them to join. The point is that rather than give the Government that portion of your salary in tax, you had an opportunity to save for your retirement.
It was decided that a quantum change had to be made in establishing the pension fund for tourism workers. However, there was an appreciation that such a pension would not be sustainable or capable of providing sufficient benefits if the workers were the sole contributors. A decision was therefore, taken where both employees and employers contributed.
Having decided on an employer-employee scheme, the next step was to meet with the leadership of the Jamaica Hotel and Tourist Association (JHTA). This included then president Evelyn Smith and past presidents and executive members, including Nicola Madden Greig, Omar Robinson, Wayne Cummings and Glen Lawrence. There had to be a buy-in by the JHTA if owners were to be asked to also contribute. The JHTA agreed that the association would actively support the scheme.
Another important factor was the existence of the Tourism Enhancement Fund, whose board agreed to provide seed money for the scheme, which would allow it to start with a substantial base, rather than a slow build-up of investable resources. The characteristics of the pension scheme envisaged were that:
- It would be a defined contributory scheme, and it was proposed that both employer and employee would pay three per cent of gross emolument for the first two years, with an incremental increase to five per cent in year three.
- It would be established by an act of Parliament.
Those tourism entities that currently do not have pension schemes would be urged to automatically enrol all new employees into this scheme.
- The ambition was for the scheme to provide each contributor with a minimum pension of $200,000 per annum.
- It would have portability between the tourism pension fund and other approved retirement schemes and superannuation funds.
- And, as mentioned before, both employer and employee would contribute.
The potential conceptual framework having been established, there was one more technical hurdle to be cleared. The laws governing pensions in Jamaica do not cover a scheme of this nature, which is not a pension scheme run by a single company, or a Superannuation Fund operated by a financial company into which individuals save.
However, there is an existing scheme, the Kingston Port Workers superannuation fund, which is similar and was established by an act of Parliament in 1968 that the experts agreed would be a suitable model and that the Tourism Pension Scheme Act could use similar principles.
Permission for the establishment of the Tourism Workers Pension Scheme has been to Cabinet twice, once under each administration, first in 2015 and again in 2016, and approval has been given both times.
As we look forward to 2019, let us hope that universal pensions for tourism workers will become a reality as it would be a game changer for the sector and put it on an even stronger path to being a true driver of economic growth for the Jamaican economy and a true partner to the thousands of workers who build it and make it a success.
We look forward to 2019!
- Wykeham McNeill is member of parliament for Westmoreland Western and opposition spokesman on tourism. Email feedback to firstname.lastname@example.org.