Edward Seaga commends the efforts at crafting a working pension scheme for public-sector workers, but he warns that its success will depend on a change in economic strategy.
Seaga, a former prime minister and now a distinguished fellow at the University of Technology, says the Jamaican Government has to develop a pro-growth agenda.
"A world-class pension scheme is possible only with a world-class economic strategy for growth. Any other course is putting the cart before the horse in which the cart will stay put while the horse standstill," he said last Thursday as speaker at a pension forum in New Kingston.
If the objective is a world-class pension scheme, he adds, "The only hope for this possibility is to change the economic strategy of the last 20 years by pegging the rate of exchange which will control inflation without another round of price increases and the consequential stress on the economy. If in the IMF agreement being negotiated the Government presently announce for continued floating of the exchange rate, it will inevitable result in detrimental changes to the proposed pension scheme."
Pension reform is one of the critical planks of talks with the IMF for a bailout deal.
This as over the years the Government's pension bill has increased from 0.4 per cent of GDP in 1990 to approximately 1.4 per cent of GDP in 2010. Controlling pension costs is therefore seen as critical to Jamaica's medium-term programme.
Contributory pension scheme
The Green Paper on pension reform, which was tabled in Parliament last year, proposes that a contributory pension scheme be established.
Seaga said at the PSOJ/Prime Asset management forum that the review of the pension system was a welcome step to improving the Jamaican economy which has been overburdened with debt.
A workable pension scheme must address areas of affordability, sustainability, suitability and predictability, he said.
"Because in the present circumstances both domestic and global financial outcomes are still uncertain, it is best to stay on a more predictable course given the anaemic performance conditions of the Jamaican economy and the re-enforcement of this view of vulnerability as forecasted in the Green Paper for decades to come," Seaga told the forum.
Sanya Goffe, attorney-at-law at Hart Muirhead Fatta and guest presenter at the forum, said a world-class pension scheme must exhibit balance, transparency and forward thinking.
It also has to be adequate, accessible and attractive, that is, it must allow for things like hardship withdrawal, indexation and increased coverage, Goffe said.
"... People may not necessarily want to withdraw the money but want to have the comfort to know that in the event of something, they can have access," she said.