Permanent Secretary in the Ministry of Transport and Works Dr Alwyn Hayles has sought to clarify reports that the ministerial residence is to be purchased by the Port Authority of Jamaica Pension Fund.

Hayles told The Gleaner Power 106 news centre yesterday that "the proceeds of the investment is to the benefit of the pension fund, but the property would be bought and owned by the Port Authority of Jamaica".

However, it was unclear how the arrangement would work.

Hayles was not able to shed light, saying he was not equipped with details as it was a (Port Authority of Jamaica) board decision.

The issue has evoked the gamut of emotions in the public domain.

Protect the fund

"Every investment undertaken by the administrators of pension funds must protect the Fund."

That's the word of a major player in the pension industry, who has weighed in on the debate that has been spurred by the purchase of the Transport and Works Ministerial residence by the Port Authority of Jamaica Pension Fund.

Revelations which emerged out of a press conference Wednesday, that $35 million has been taken out of the Port Authority of Jamaica Pension Fund, to purchase a residence for the transport minister, has been met by a wide range of public reaction.

Attention has been drawn to regulation 34 of the Pensions (Superannuation Funds and Retirement Schemes) Act of 2004, which was taken to Parliament in 2006.

The regulation states, among other things: "the assets of a fund or scheme shall not be directly or indirectly invested in real property for occupancy or expansion of the business of the investment manager or administrator or its associate companies".

An expert in the administration of pension schemes, who spoke on condition of anonymity, cited some of the do's and don'ts in pension-fund management.

Market-driven

The expert revealed that each transaction that is undertaken by the pension fund should be done at arms length.

In circumstances in which the transaction is with a related party, it must be clearly market driven.

Citing an example, the expert said the pension fund should not purchase properties or any other assets for more than their value.

Additionally, the income generated from the asset must be at market value.

To keep the transaction above board, the rate of return must be carefully calculated and compared with other rates of return.

This has raised questions about whether a $20,000 per month rental for the Millsborough property, which was reportedly acquired for $35 million and refurbished at a cost of $14 million, would guarantee the required rate of return.

gary.spaulding@gleanerjm.com