Setting the record clear on pension schemes
THE EDITOR, Sir:
In the article titled 'Costly management leads to winding up of pension schemes' appearing in The Gleaner, dated August 5, 2016, we note that there are a number of inaccuracies. Accordingly, we are using this medium to provide clarification on some of the issues raised.
Winding-up numbers: The assertions in the article by Constance Hall that 400 pension plans have been wound up over the last eight to 10 years is incorrect. The records of the Financial Services Commission (FSC) show that 263 plans were wound up between May 2005 and July 2016.
Associated cost: Further, the attribution of cost, by Mrs Constance Hall, as the reason for the number of pension plans being wound up is not supported by analysed data submitted to the FSC regarding all applications for winding up. The data reflect that approximately 65 pension plans, representing 25 per cent of the 263 applications filed with the FSC, have been wound up as a result of the perceived costs associated with their administration.
Management of pension plans: Angela Fowler's statement, which purports that small pension plans cannot be self-managed, is incorrect. The Pensions (Superannuation Funds and Retirement Schemes) Act, 2004 provides that the trustees of a pension plan must designate an administrator and investment manager and that the same person may function in the dual capacity. Additionally, an administrator or investment manager must be a company licensed by the FSC. There are no statutory provisions precluding the trustees or the sponsor of the pension plan from satisfying the foregoing and any other statutory requirement.
Growth of pension plans: It is noteworthy that extensive consultations were held with all relevant stakeholders prior to the implementation of Phase I of the Pension Reform Agenda. It should also be noted that from that time to now, the expectation was that a "natural evolution" would have occurred, resulting in a decline of superannuation funds, particularly small ones, with a corresponding increase in approved retirement schemes.
The FSC, therefore, finds little merit in the suggestion by Angela Fowler that the reform measures have discouraged growth. Any meaningful assessment concerning achievement of the objective of this phase of the reform agenda must take into account pension coverage, as well as growth in the assets under management, not merely the number of pension plans.
On both fronts (coverage and assets), we are pleased to report that steady and positive progress continues to be made annually. Based on research conducted by the FSC in 2004, pension coverage was approximately five per cent of the labour force and total assets (inclusive of plans that were winding up) less than $100 billion. As at March 31, 2016, the statistics show that coverage is approximately nine per cent of the labour force, while assets stood at $399 billion (for active plans only).
Manager, Office of Communication & International Relations
Financial Services Commission