Minister without Portfolio in the Ministry of Finance and the Public Service Don Wehby. - File

The Senate on Friday passed amendments to the Income Tax Act, providing for significant improvements in tax incentives for savings in pension schemes.

Under the new arrangement, the Government will provide income tax relief of up to 20 per cent of the annual chargeable income of an employee or a self-employed person, which goes towards a retirement scheme.

Employers will also receive income tax relief on the amount of money they contribute to the employee's pension scheme. This means employers will receive tax relief on whatever portion they contribute to the equivalent of 20 per cent of the employee's income.

The bill stipulates that where the employer's contribution is less than 10 per cent, the employee may contribute the difference between the employer's shortfall and the maximum 20 per cent.

Lump-sum payments

It also removes the limit of $120,000 for lump-sum payments under such schemes.

The bill was piloted by Minister without Portfolio in the Ministry of Finance and the Public Service, Don Wehby, who hailed it as providing significant improvements in incentives for contributions to such schemes.

"We regard it as most important that proper arrangements are in place to enable all Jamaicans during their working lives to save towards adequate pensions on retirement," he said.

While agreeing that there were important advances in the legislation, Opposition Senator Mark Golding questioned why it did not also provide tax relief for the payments the contributor would receive upon retirement. He also called for further changes to facilitate portability of pensions.

Senator Wehby, in response, promised that more changes to the tax laws would be introduced shortly, taking account of some of the issues highlighted by the Opposition member. Some matters, he said, would be addressed in phase two of the reform of the pension system, while others would be included in the wider review of the country's taxation regime.