Wed | Dec 7, 2022

VM targets big pensions market

Published:Friday | September 9, 2022 | 12:08 AM

With some 815 private pension plans covering only a fraction of Jamaica’s 1.2 million workforce, the deal inked Tuesday by VM Pensions and the Jamaica Manufacturers and Exporters Association, JMEA, for a private pension plan covering workers in the manufacturing sector, targets a large underserved market that is made up of more than 88 per cent of eligible participants.

“The main target for this pension plan is the membership of the JMEA, affiliated companies, and by extension their workers and families,” CEO of VM Pensions Management Limited Conroy Rose told the Financial Gleaner in an interview following the launch.

Rose said discussions on the pension scheme started in earnest when the relative success of a new pension programme for transport sector workers became apparent. VM Pension’s partnership with transport workers was introduced in February 2022 and has been growing, according to Rose.

He pointed out that the pension product developed for the manufacturing sector allows works to access short-term loans against their pensions. It also prepares a company for approaching the equities market, he said without elaborating.

As at March 31, 2022, the pensions regulatory body, the Financial Services Commission, FSC, has reported that the total value of assets in the Jamaican pensions industry amounted to $712.26 billion. Total membership stood at 142,778, representing an 11.36-per-cent coverage of the labour force, according to the FSC.

Speaking at the plan launch, Rose described this coverage as small. He pointed to industry experts’ prediction of “a pandemic of poverty of the elderly in Jamaica by 2037”, given the small pensions coverage and the inadequacy of state-run social safety nets, such as the Programme of Advancement Through Health and Education and the National Insurance Scheme.

“When we started the discussion (with the JMEA) we said, let us go beyond pensions. Manufacturing is the engine of our society and so we should be talking more investment, the equities market and so on,” Rose said.

Endorsing the pension plan, Minister of Industry Investment & Commerce Senator Aubyn Hill noted that although private pension schemes’ coverage of the workforce was low, there was a business opportunity for pension funds in the 88 per cent of the workforce that remained uncovered.

“The value of that market segment is anybody’s guess. We take the minister seriously in his charge to us. It is lamentable that only about 12 per cent of the workforce has a private pension plan, but we want to focus on the 88 per cent,” Rose noted.

The FSC is reporting that the pensions industry experienced an average growth of 2.39 per cent per quarter over the past five years. It has said that the employed labour force increased by 1.81 per cent during the quarter ending March 2022. At the same time, the regulator said membership in private pension plans increased marginally by 0.71 per cent, but there was a 0.88-per-cent decrease in private pension coverage for active plans to 11.19 per cent as at March 31, 2022, while total private pension coverage decreased to 11.36 per cent.