Government to confront pension crisis - Williams announces raft of amendments to act
The Government is taking steps to amend the Pensions (Superannuation Funds and Retirement Schemes) Act, following the disclosure by the Financial Services Commission (FSC) that only a handful of the Jamaican population had a pension plan.
In her sectoral presentation to Parliament earlier this week, Fayval Williams, minister without portfolio in the Ministry of Finance and the Public Service, disclosed that "as at June 2017, the FSC reported that there were 399 active private pension plans with assets of $520.6 billion covering 9.4 per cent of the employed labour force, or about 115,000 persons".
"If we add the Government's pension, that would take us up to about 16 per cent of the employed labour force," she continued.
Williams told Parliament that the proposed amendments to the Pensions Act include portability - a feature that will allow members of an approved superannuation fund or an approved retirement scheme to transfer their benefits to another approved superannuation fund or retirement scheme.
"So if persons are leaving one job for another, they can easily transfer their pension benefits," the minister stated.
She said that the amendments would also include a provision in which a pension could be provided to a parent or legal guardian and was funded by the child of the parent or guardian.
The Government would also be moving to introduce a five-year vesting period, allowing employees to be entitled to pension benefits based on the employer's contribution after the ending of the period. The raft of amendments would also include the concept of a pension pay-out product as an additional method of paying out pension benefits.
"This is a structured pension payment arrangement, which guarantees for the life of the pensioner a series of fixed or variable payments. This would be an alternative to annuities," explained Williams.
She also said that the amended law would permit concurrent membership in both a superannuation fund and a retirement scheme, or multiple retirement schemes, so long as the total contributions did not exceed the limit as prescribed by the Income Tax Act.
"The overarching goal is to move the needle in the private pension industry from only 9.4 per cent of the employed labour force having a private pension or retirement scheme to a significantly higher percentage.
"Different countries use different approaches to encourage pension savings. We have chosen a voluntary approach with tax incentives to encourage the growth of private pensions," the minister stated.