Chairman of the Pension Funds Association of Jamaica, Allan Lewis, said the Ministry of Finance has assured him that it will address in due course, the matter concerning an estimated J$10 million in withholding tax the Government owes to pension funds.
The Government has collected the money in taxes with the promise that it would be returned. It is owed to local superannuation and pension funds.
In several meetings with government representatives, the association's members have argued that the lack of those funds was impacting pension fund performance and the ability of trustees to enhance benefits to members.
Speaking at the annual general meeting of the Pension Funds Association last week, Lewis told members that the Ministry of Finance and Planning has now indicated that it is a requirement under the IMF programme "to bring the liabilities on to the Government's accounts. This will allow the creation of a security for it."
He said "the minister assured me that the financial secretary is working on the matter and will work with the industry to resolve the matter. At least, we have a plan of how we will get it in time. It may not be tomorrow as we wish, but the issue is being addressed."
However, the chairman said the issue of overseas investment by pension funds has not been resolved to their satisfaction.
"There is no agreed code of operating. The Bank of Jamaica has maintained different thresholds for different groups in relation to the percentage of pension funds which can be invested," he said. "One technique used is to underwrite investments in US dollars or overseas investments," he added.
Lewis said that in the context of the National Debt Exchange (NDX), demand for the majority of government securities "has fallen drastically because the value of the bonds today are less than they were previous to the NDX. The concern is that there are assets which should be liquid, and they are not as liquid as they should be."
He said the association also continued to press for the second phase of pension reform, under which such issues as withdrawals from retirement schemes will be addressed.
"This segues into the matter of part two of the reform of the Pensions Act, which was started five years ago. As it stands, members have the right to withdraw their funds" but "then there will always be a problem of adequacy at retirement," Lewis said. "Most developed countries have mandated contribution to some kind of retirement scheme of at least five per cent of income, if not more."
Lewis also reported that the association has continued to work with the Financial Services Commission (FSC) on a code of conduct.
"The provisions of the Pensions Act requires the development of a code of conduct for investment managers and (the FSC has) asked us to assist. We developed a draft two years ago which was not finalised. They have re-approached us to complete the work," he said.
The Pension Funds Association said it was also working with the Caribbean Actuarial Association and the Jamaica Actuarial Association on the plan for public-sector reform. "The issue of these unfunded liabilities will have to be dealt with," Lewis said.