Oran Hall | What’s in the tourism workers pension scheme
The Tourism Workers Pension Act 2019 establishes “a defined contribution pension scheme for tourism workers and self-employed workers from which is to be paid retirement benefits in respect of each member and ancillary benefits to beneficiaries, and for other connected matters”.
The purpose of the scheme, which is expected to start operating in January 2020, is to provide retirement and other benefits for members upon normal retirement, early retirement or late retirement. It also provides for benefits to members due to ill-health, or a disability, and to the beneficiaries of a member upon the death of that member.
The resources of the scheme will come from an initial endowment of one billion dollars from the Ministry of Tourism, as well as from contributions paid by tourism operators on behalf of members of the scheme in their employment, mandatory and voluntary contributions paid by members, assets transferred by the trustees, interest, dividends or other investment income accruing from the assets of the scheme, and donations paid into it.
It provides for a Board of Trustees to be responsible for the administration, investment management and control of the scheme. All trustees are required to be registered by the Financial Services Commission and, as such, must meet its requirements for fit and proper persons, which speaks to their honesty, reputation and integrity.
The following are eligible to be members of the scheme:
- A tourism worker who, at the date of commencement of the act, is over 18 but less than 60, and is not a member of an approved pension plan.
- A person who is over 18 but under 60 and becomes a tourism worker after the date of the commencement of the act.
- A self-employed worker upon approval of the Board of Trustees. (A self-employed worker who wishes to become a member of the scheme must make an application to the Board of Trustees in the prescribed form.).
- A person who is ordinarily resident in Jamaica for a period of not less than six months prior to the date of admission into the scheme.
Every tourism operator is liable to remit to the investment manager mandatory periodic contributions to the scheme in respect of every tourism worker in his employment, who is a member of the scheme. The sum to be remitted is an amount equivalent to three per cent of the worker’s earnings in the first three years following the commencement date of the Act and five per cent thereafter.
A self-employed tourism worker who has been admitted to the scheme is required to remit to the investment manager, at least once annually, the mandatory contribution equal to three per cent of earnings in the three years after the commencement of the act and five per cent thereafter.
A member may also make a voluntary contribution to the scheme by submitting to the Board of Trustees written notice in the prescribed form. The aggregate contributions to the scheme in respect of each member is not to exceed the limit imposed under the Income Tax Act in respect of ordinary annual contributions to an approved pension plan. A member who elects to make voluntary contributions may vary or terminate the payments by submitting written notice to the Board.
The administrator is required to establish and maintain a retirement savings account in the name of each member and to cause the contributions to be credited to the retirement savings account of each member upon receipt of notice that the contributions to be paid have been duly remitted to the investment manager. The retirement savings account is to consist of the following:
- mandatory contributions and voluntary contributions made by the member and interest credited to that date
- where applicable, contributions paid by the tourism operator on behalf of the member plus interest credited to that date
- where applicable, transferred assets received by the Board in respect of a member from an approved pension plan with credited interest up to the date of assessment
- bonuses and allocations from surplus that are granted by the board, accumulated with credited interest up to that date
The board is required to provide each member, within four months of the end of each fiscal year for the scheme, with a statement of the retirement savings account of that member for the financial year. Contributions made or on behalf of a member is to be vested in the member immediately.
A member who joins another approved pension plan may request the Board to transfer all the assets in the retirement savings account of that member to the trustees of another approved pension plan or an overseas pension plan subject to the approval of the Board of Trustees or such other body of that pension plan.
At the retirement of the member, the board is required to purchase an annuity for the member, or otherwise secure the pension of the member. If the annual annuity does not exceed fifty per cent of the national minimum wage, the member may elect in place of the annuity, a lump sum equal to the value of the retirement savings account at the date of retirement.
The board may augment the total of the retirement savings account of a member to an amount that is sufficient to purchase the prescribed minimum annual pension if the balance in the retirement savings account is insufficient to buy the prescribed minimum annual pension subject to certain conditions being met.
My next column will take a critical look at this ground-breaking pension arrangement.
- Oran A. Hall, principal author of The Handbook of Personal Financial Planning, offers personal financial planning advice and counsel. firstname.lastname@example.org