THE EDITOR, Sir:
I WRITE from the perspective of a former manager of a trust company, which had as the major part of its portfolio, pension schemes administration and investment banking. That company had, and I believe still has, the largest pool of pension funds in the country.
I am elated (to say the least) that a reformation is about to take place. It is long overdue. I would imagine that the searchlight was turned on to the industry during the Air Jamaica issue, a matter on which I twice commented. I am not fully aware of what changes are being contem-plated, but I wish to make some observations, for the common man i.e. contributors to pension schemes, based on my experience.
The trust deed is the most important part of the equation. It has to cover all the bases and be futuristic, as it addresses in large measure a long term situation. Care must be taken to have employee input when drafting the deed or thereafter. The winding down, as in the Air Jamaica issue, should not be overlooked. Additionally, an employer ought not to seek to alter the trust deed to suit himself.
The next important feature is the appointment of trustees. As the word 'trust' implies, one must have an implicit belief in the honesty, integrity and reliability of another. As with all fiduciary positions i.e. membership on boards of statutory corporations to include schools, hospitals etc. and of listed companies, persons appointed to serve must 'bring something to the table'. By that I mean that they must have demonstrated a skill relevant to the business at hand. Too often trustees/board members 'sit out' meetings without making any contribution, except for confirming the minutes, the contents of which they are unaware, because they were either asleep or not tuned in to the matters arising. So an organisation must determine whether, in its best interest, the Trustees will be drawn from its core of employees, i.e. from the C.E.O. down, and/or whether to invite trusted and knowledgeable persons from without to join their Board of Trustees.
Such organisation may therefore appoint administrators of the pension scheme, but wish to work the funds by themselves. Still, others may prefer to appoint a financial institution to handle both aspects. And once that "power" has been vested, so it should remain, until withdrawn based on the rules dictated by the Trust Deed. During my tenure in the business, there was a situation where, after analysing carefully an investment "opportunity" presented, I decided against it and made my recommendation to the Board of the Trust. The C.E.O. of one company over which the trust company had sole discretion informed me that he wished for an amount to be invested in the venture. I reminded him of the agreement and he said that he was giving me instructions. I advised him to put it in writing. Upon receipt of his letter, I sent him a copy of the trust deed with an appropriate letter denying his request. For the records, the "investment opportunity" turned out to be disastrous.
My experience is that undue influence may also be exerted from within financial institutions, especially where bad credit situations exist in other arms of the same organisation. Requests for refinancing as leases/mortgages to allow a customer breathing space, are not far fetched. The problem is that if the customer had a poor repayment record in the past and nothing significant has changed for the better, chances are that the arrears will begin to build up again and the "pension fund", through which the lease/mortgage was channelled, would begin to lose interest/yield. Will the fund get the best rates (all things being considered) for deposits or only the rates paid by the financial institution to which it is tied? And what of insider trading? The least said on this the better.
The matter of civil penalties was discussed briefly on one of the early morning radio programmes recently. To my mind, it will be difficult to penalise a Trust company or Board of Trustees for making investments "in good faith". In the event of a glaring situation where the indicators were for the most part negative and the required number of other trustees did not participate in the decision, then a case could be made.
The rate of return to a contributor who wished to move on without a pension, or to have his/her balance sent to the next employer, was at one time tied to the interest on an ordinary savings account, that being six percent (6%) for a very long time. Even if the actuarial analysis reported a return of say, 20% at any point in time, the return on the amount being paid was 6%, because that was the law. I am not aware of any change and I am hoping that the new entity entrusted with the job of protecting "poor people's" money will not bypass this aspect.
I am, etc.,
Sybil M. Christie
schristie@cwjamaica.com
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