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NCB enters IRA market with 'smart' product

Published:Tuesday | March 23, 2010 | 12:00 AM

 The supplier market for individual retirement account (IRA) products continues to grow, with NCB Insurance Company Limited (NCBIC) on Tuesday putting out its own 'Smart Retirement' plan.The IRAs are are sold to self-employed and other individuals who are not
members of a supperannuation scheme.

NCBIC's product is tailored to self-employed and small business owners.

"It is estimated that Jamaicans spend an average of 20 years in retirement and even longer it therefore puts us at risk of out living our savings if we are not careful and save sufficiently," said Patrick Hylton, group managing director of NCB at the product launch at the LIME Golf Academy in Kingston.

The plan targets savers between ages 18 and 69.

Subscribers are required to make at least one payment per year, but can also add to their plan on a monthly, quarterly or semi-annual basis.

The plan offers tax free benefit such as lump sum payments of up to 25 per cent of the accumulated value paid to members upon retirement, tax free exemption for investment income earned through the years of participation as well as immediate pension benefits in the event of permanent disability before retirement.

Further, in the event of death the plan will refund the total accumulated value to a beneficiary.

Customers will also have a choice of how their contribution is invested - a fixed income fund, or a Âbalanced income fund comprising fixed income securities, equities, real estate and other securities, said Ann-Marie Hamilton, general manager of NCBIC.

"The smart fixed income fund will be invested primarily in Government of Jamaica securities and other fixed income for persons who are more risk averse and want to know that they have their money set aside," said Hamilton.

"The balance fund offers an opportunity to earn a little more ..of course it has a little more risk but as a pension plan we will not ever get too risky because while we want to take a little risk so you can make a little more we still have to be cognisant that this is a pension plan and all the securities invested must be for a long term type saving."

The market for IRAs was opened up by the Financial Services Commission less than two years ago.

Since then, firms such as Scotiabank Jamaica Insurance, Mayberry Investments Limited, Prime Asset Management and Jamaica Money Market Brokers and COK Cooperative Credit Union have brought new IRA or other retirement products to market.

It is estimated that 90 per cent of working Jamaicans in the private sector do not contribute to a company sponsored pension fund, leaving open a wide market for IRAs, which allows for savings of up to 20 per cent of annual income.

At March 2009, the most recent data available, the FSC estimated the private pensions market to be valued at $196.5 billion, including individual retirement plans.
NCB says it already has $42 billion in pension funds under management.