Growth & Jobs | Retirement planning should be part of the financial planning conversation – Blagrove

Retirement planning should be part of any conversation about financial planning, says Othneil Blagrove, senior manager – sales, JN Life Insurance Company. He therefore wants every Jamaican to take the matter of retirement planning seriously, regardless of age.

Blagrove said, with many employed Jamaicans not being a part of a pension scheme or contributing to a retirement fund, any conversation about financial literacy and wellness should involve retirement planning.

“Based on the data gathered over the years, it has been reported on many occasions that just under 20 per cent of the population are a part of an approved pension scheme,” he stated. “Based on the data, this would be about 200,000 persons out of a labour force of about 1.1 million persons, which means that there are still some 900,000 Jamaicans who will have no protection when they retire, or if there is a situation where they are unable to work again,” he added.

“The number of Jamaicans being eligible for a pension upon retirement is low, especially when you consider that the Planning Institute of Jamaica has indicated that the country’s population is ageing. If more persons aren’t educated about the importance of a pension, then the country will have an even bigger burden in terms of having a social safety net in a few years. Therefore, it is important that retirement planning be included in conversations about financial planning, regardless of age,” added Blagrove.

He pointed out that, in the recent budget debate, Finance Minister Dr Nigel Clarke announced an increase in the benefits paid to pensioners by the government. The adjustments will see pension and age-relief exemptions move from $80,000 to $250,400, but this is still not enough for some sections of those in their golden years. He added that the National Insurance Scheme (NIS) has reported that only about 40 per cent of Jamaicans are eligible for pension benefits under the scheme. Therefore, education about the benefits of having a pension should be promoted.

“Even with the adjustment to these exemptions, the recipients will be affected by inflation. Also, when you examine the reality that the NIS benefit is approximately $6,800 fortnightly, the more individuals who are a part of a pension scheme, the better it is for the country and also their families. Therefore, setting aside funds for retirement will be beneficial to the person during their golden years,” Blagrove said.

He added that, when contributing to a pension, persons should take the opportunity to increase their contributions to the maximum 20 per cent of their income, where possible.

“What the research has also revealed is that the minimum contribution towards your pension, whether it is three per cent or five per cent, will not be enough to support you upon retirement. Therefore, saving what you can, in addition to the maximum 20 per cent allowed statutory minimum, will help to increase the income you could receive during retirement,” he said.

He added that there were tax benefits associated with increasing monthly pension contributions.

“If you increase your contributions to 20 per cent, you will receive valuable tax benefits, which means you will get a tax relief on that portion of your personal contributions. While that is a benefit, the greatest perk will be the peace of mind upon retirement knowing that you can provide for yourself,” he said.

The senior manager revealed that investment experts posit that individuals need 40 years or more of savings to maintain the lifestyle they currently enjoy in retirement.

“It means that, if you are above a certain age, no matter how you save now, you will never be able to live the same lifestyle you lead now in retirement, because you have lost some of the years needed to do that investment,” he revealed.

“Therefore, having a pension becomes even more essential, since you will need money to finance daily expenses such as food, utility bills, medication and other items as the need arises. Having a pension goes beyond having a piece of land or a house that provides income through rental. It is about having a source of liquid cash upon retirement,” he stated.