Fri | Sep 22, 2017

Public-sector workers to start contributing to pension in April, JTA president brands the move as dangerous

Published:Monday | January 4, 2016 | 1:00 AM
Norman Allen, president of the Jamaica Teachers' Association

With the Government pushing to institute legislation for the new public-sector pension system by April, the Jamaica Civil Service Association (JCSA), the union which represents some public-sector workers, says it is uncomfortable with the unwillingness of the State to match the five per cent pension payment to be made by workers.

At the same time, the proposal for public-sector workers to contribute five per cent of their gross salary towards their pension has been branded as "dangerous" and "unbearable" by Norman Allen, president of the Jamaica Teachers' Association (JTA).

"While teachers are not opposed to a contributory pension system, it is impossible for teachers to take on a five per cent payment towards their pension at this time," Allen told The Gleaner.

"It is dangerously heavy. Five per cent of gross salary is heavy. Many persons will not be able to survive because you have your mortgage, you have your car loan, your hire purchase [bill] ... . When you take five per cent, recognising how meagre the seven per cent increase is, some people may not be able to make it to work," the president added.

Public-sector workers, including teachers, endured a four-year wage freeze and only recently inked an agreement for a seven per cent increase over two years. Entry-level diploma-trained teachers earn $1.1 million, inclusive of allowances while trained graduate teachers are paid $1.3 million per year. The five per cent to be taken out for pension would translate to about $5,000 per month for entry-level teachers.

"We just simply can't afford it come April 1," the JTA president said

The public-sector pension bill, tabled in Parliament late last year, proposes the creation of a defined contribution scheme for public-sector workers who will now be required to contribute to their pensions.

O'Neil Grant, president of the JCSA, believes that the proposed system of pension reform must give due consideration to the plight of workers in the public sector.

"Pension is not for the government, pension is for the worker, so we must ensure that what comes out of it is beneficial to the worker," he told The Gleaner.

The bill, while making it clear that the Government is obliged to make a contribution to workers' pensions, does not prescribe the amount to which the State is liable.

"Commencing as from such date as the minister shall determine, the Government shall pay into the fund in respect of each pensionable officer periodic contributions in such amounts and manner as may be determined by the minister by order, subject affirmative resolution of the House of Representatives," the bill, tabled by Finance Minister Dr Peter Phillips, said.

The White Paper on Pension Reform, tabled in Parliament in 2013, proposes that the Government pay 3.5 per cent for the 5.0 per cent contribution that workers will be asked to make.

Helene Davis Whyte, a vice-president of the Jamaica Confederation of Trade Unions, said the State should match the contribution evenly.

"From all the advice that we have gotten actuarially, the Government will be able to make payments to workers when they get to pension age. It is normal for the worker to pay five and the employer to match it with another five per cent," she said.

It was costing the Government $25 billion in 2014 to fund public-sector pensions, and projections are that it could reach $39 billion by 2016.

The White Paper on Pension Reform has proposed that the Government contribute $17 billion per annum for 40 years to fund an implicit pension debt.

In a statement issued yesterday, the JTA president said that there are stories of "several government workers and indeed teachers who have become paupers in retirement and not by virtue of squandering but through an absence of indexation.

"The JTA continues to propose what we consider workable solutions to the way contribution to pension is rolled out," the president said, while adding that the union has written to the Government proposing alternatives.

"We know that people in Government are reasonable people and they would recognise that our teachers could not survive if imposed with a contributory pension at this time," Allen said.

Meanwhile, the bill also proposes that the retirement age be gradually increased to 65 years by April 2021.

That workers will lose one per cent of their pension for each year of early retirement that they take is another proposal in the pension-reform legislation that does not sit well with Grant.

"What this is going to cause is that persons who are able and willing to go will stay longer in the system and so the treadmill of persons leaving school ... to come into the workforce will be slowed by persons who are staying on at least five years longer, because of the fact that they won't be able to retire early, and if they do retire early, they are going to be penalised," he said.

andre.poyser@gleanerjm.com