Finance Minister Dr. Omar Davies (left), confers with Brian Wynter, executive director of the Financial Services Commission, at a seminar on the new Pensions (Superannuation Funds and Retirement Schemes) Act last Friday, at the Jamaica Conference Centre.
-Ian Allen photoDennise Williams
, Staff Reporter
BY THE end of this fiscal year, the Govern-ment is expecting to pass into legislation the Pensions (Superannuation Funds and Retirement Schemes) Act.
Minister of Finance and Plan-ning, Dr. Omar Davies, at the seminar on the new Act held on Friday, January 30, at the Jamaica Conference Centre stated this:
The major thrust of the Pensions Act is to put pension schemes and superannuation funds under the regulation of the Financial Services Commission (FSC). The genesis of the need to regulate the industry sprang from the collapse of the financial sector in the 1990s.
He said, "This proposed Act is part of the measures to reform the financial sector to protect the savings of the most vulnerable of groups. The mid-90s demonstrated the laxity in the financial sector which caused the Govern-ment to step in to rescue it."
But the intended regulation will be to the benefit of the industry and the nation as a whole. According to Brian Wynter, executive director of the FSC, "We are not re-inventing the wheel, only regulating it." Now while the legislation itself might be considered some-what technical to the average layperson, in its simplest terms, states Dr. Davies, "The Act means that the average Jamaican worker will have a greater sense of protection."
PENSION ARRANGEMENT
Mr. Wynter supports this statement by saying, "This Act will provide better access to pension arrangements so that when a person is not able to work, they will be able to live. Further, this Act will give the reassurance that there are rules and a regulator to oversee that those rules are enforced. Additionally, this proposed Act will give members of the pension certain rights and privileges that did not exist before such as the right to complain to the FSC. When the complaint is lodged, we are obligated under law to conduct an inquiry."
During the presentation at the Conference Centre, Mr. Wynter went through some of the highlights of the legislation.
A Superannuation Fund (SF) is an occupational pension plan for employees, which must be registered with the FSC.
A Retirement Scheme (RS) is for Jamaican residents who are self-employed or persons in non-pensionable posts such as contract workers and employees of companies without a pension plan.
Under the SF, the maximum sponsor contribution will be 10 per cent of the member's annual salary or wages with the maximum member contribution to be 10 per cent of member's annual salary or wages.
Under the RS, the maximum contribution of the member will be 20 per cent of annual emoluments (within certain limits). Now the annual contributions for SFs might seem familiar. Mr. Wynter addressed this, "These requirements are in existence under the Income Tax Act. With this Act, it will bring these requirements under the supervision of the FSC." However, what is new is the amount that can be saved under the RS plan. Currently, especially in the cases of credit unions, self-employed persons can save 10 per cent of their annual earnings or $6,000 whichever is less. Mr. Wynter did confirm with Sunday Business that the amount allowed to be saved by self-employed persons will increase above this $6,000 limit.
INTERESTING ASPECTS
Other interesting aspects of the new Pensions Act that will affect workers are one aspect of the definition of related party. Stated in the Act, "for the purposes of subsection (2)(e),(g),(h) or (i), a spouse includes (a) a single woman who has lived and cohabited with a single man as if she were in law his wife for a period of not less than five years immediately preceding the date of his death and, (b) a single man who has lived and cohabited with a single woman as if he were in law her husband for a period of not less than five years immediately preceding the date of her death."
And while the Act does go into great details about the benefits and rights that individual members of a RS or SF enjoy, the major thrust is the monitoring power of the FSC. The Act speaks to the following provisions:
Approval and registration of SF and RS
The licensing of administrators and investment managers (the companies and individuals that run the pension plans)
The registration of trustees
Specifying the fit and proper criteria, to met by persons who are administrators, trustees, board members, investment managers and other persons in managerial positions
The furnishing of information to the FSC and to members of a SF or approved RS
The winding up of Super-annuation Funds and Retire-ment Schemes
The amount of solvency that firms are required to have
The prescribed steps that must be taken to amend the pension plan
The other important issue that was addressed at the seminar was the sanctions that are prescribed in relation to offences which includes:
Operating as administrator or trustee without a licence or registration
Operating unregistered pension funds or retirement schemes
Breach of confidentiality
Failure to keep records.
Of course, the regulation of the many pension plans in Jamaica cannot be executed for free. However, at the seminar, Mr. Wynter stated that the exact level of fees had not been determined. "The fees have not been set yet. We will only charge the level of fees that will support the transparency and other principles that all parties can agree to."
REDUCED BENEFITS
In terms of whether pension fund managers would pass on the fees to their members in the form of reduced benefits, Mr. Wynter replied, "I hope that this does not happen. But with this legislation, I expect that there will be more firms entering the pension plan industry. With more companies in the pension scheme, the competition will force companies to offer the best plans to prospective members.
"Although I think that existing pension funds might balk at the fees at first, in the end, I believe that this legislation will lead to better pension fund arrangement."
The one aspect that is missing from this current piece of legislation is the right of pensions to vest and the right of workers to travel with their pensions from one job to the next. Both Dr. Davies and Mr. Wynter agree that this aspect of pensions will be brought into Parliamen-tary debate at a later date. The important aspect at this current stage is regulation of pension funds and the protection of Jamaican workers.
