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JCSA president says pension reform slow pace worrisome

Published:Wednesday | October 1, 2014 | 12:00 AM
O'Neil Grant - president, Jamaica Civil Service Association.

Daraine Luton, Senior Staff Reporter

O'Neil Grant, president of the Jamaica Civil Service Association (JCSA), said members are worried about the pace of pension reform and are fearful that the April 2016 deadline will be missed.

"Our biggest issue right now is pension reform and its pace. Public-sector transformation is on track based on the plans that we have and the re-energising of the public sector transformation committee," said Grant.

Jamaica's agreement with the International Monetary Fund calls for the country to implement a reform of the public sector pension by April 1, 2016.

"We are having issues with the timing and the pace of the reform because it has actually slowed down, and there is a danger from where we sit that we might actually miss the April 1, 2016, implementation date, and if it is implemented on that date, we don't know what is going to be implemented. People are just going to be asked to contribute on that date without having the full legislation in place," said Grant.

At present, public servants such as members of the police force, teachers, and central government workers are awarded pensions through an unfunded defined benefit scheme. These benefits are determined by a prescribed formula. This is unlike a defined contribution scheme where benefits are determined by returns on investments of contributions made by employers and employees.

Workers become eligible for a pension after a minimum number of years as stipulated in legislation. Some public-sector workers make contributions, but these bear no relationship to the benefits received. All pension benefits are paid out of the Consolidated Fund.

It is costing the Government $25 billion this year to fund pensions, and projections are that it could reach $39 billion by 2016.

In an interview with The Gleaner, Grant said the need for public sector pension reform is impatient of debate, but he states that there are elements in the proposal that the unions find uncomfortable.

"We are really concerned with the reform of pension in the public sector. This is supposed to be coming on stream come April 1, 2016, and we are a little bit concerned that the steering committee has not been formed; the drafting of legislation is not yet started; the White Paper (on pension reform) is still out there, and I understand that the ministry has been going around and promoting the White Paper as the final document, which the unions have objected to strenuously," said Grant.


He added: "The Government is moving towards a national pension scheme that speaks about portability and towards determining a standard vesting period. But the pension reform for the public sector is not facilitating portability and standard vesting. The unions are objecting to that because we want to ensure that the nation saves, and the nation can only save if the pension is portable and the vesting period is standardising across all pension arrangements."

The White Paper notes that while some public-sector workers make contributions, "these contributions bear no relationship to the benefits received". With all taxpayers now required to fund the pensions of public-sector workers, the White Paper is proposing that all government employees make a compulsory contribution of five per cent of salary and make voluntary contributions.

The paper is also proposing that the Government contribute $17 billion per annum for 40 years to fund the implicit pension debt, plus 3.5 per cent of employees' salary for the ongoing service cost; and that the pension fund be actuarially reviewed every three years, or earlier, if there is a significant change in the economic environment.