By Barbara Ellington, Senior Gleaner Writer
Derek Jones
THE PENSION Fund Association of Jamaica (PFAJ), will be launched this month. Having served as head of the nine-member steering committee that has been working to set up the association for the past six months, attorney Derek Jones is tipped to be the chairman of the association. He brings to the group a wealth of experience and knowledge of the subject, having been the chairman of two very substantial pension funds.
The Sunday Gleaner spoke with Mr. Jones who revealed that the nine-member committee comprised: Appliance Traders Limited, Barita Investments, Bank of Nova Scotia, Guardian Life, Grace, Kennedy & Company Limited, West Indies Trust Company Limited, Cable and Wireless, Life of Jamaica and Lascelles-Henriques. The main goal of the PFAJ is to provide representation and other services for those involved in designing, operating, advising and investing funds of occupational pension schemes in Jamaica. The steering committee decided that the association would try to ensure a workable regulatory environment and be a lobby group for those it represents.
"We would also provide education and training for trustees and members of pension funds. Membership will be open to all pension funds, investment managers and pension funds administrators," Mr. Jones said. There are over 800 active pension funds in Jamaica with close to US$3 billion under management. The funds are made up of contributions from both employees and employers. The job of the fund management is to invest funds so that they will be available when pensioners retire.
Asked whether funds are invested mainly in stocks, Mr. Jones said, "The type of investment depends on the time frame before retirement; the three options are stocks, real estate and the money market, each fund manager has to decide on the mix of investment best suited for them," he said.
FEAR OF GOVERNMENT
The Sunday Gleaner wanted to know whether there was any basis for the fear of pensioners that once regulation takes place, Government will be able to take control of pension funds.
Pointing to the Air Jamaica experience that led to concern about Government trying to get a hand on pension surplus, Mr. Jones said a sensible regulatory framework to include rules and regulations will prevent that from happening. "Regulation is an important part of security and there must be a balance between pensioners' sense of security and regulation," he said.
The PFAJ has received the blessing of the Financial Services Commission (FSC), that plays a regulatory role in the association. Both hope to enjoy a harmonious relationship. The committee has examined the pension Bill now before Parlia-ment and made several suggestions, some of which were taken aboard and the rest will form part of the second round of legislation.
Currently there is a mechanism in the law that gives Government the right to get its hands on pension funds, but if a group wants to wind up a pension scheme, it must first get an actuary to work on it and submit a proposal. The FSC has the power to change that procedure as it sees fit. Technically, that situation could see the FSC dealing with pension surpluses as it sees fit and it is issues like these that the steering committee is working towards ironing out before the Bill becomes law.
FUNDING AND TRAINING
The steering committee held consultations with the 80-year- old Association of Pension Funds in the United Kingdom to learn from their successes. The UK association provides training for pensioners, holds conferences and provides publications, to educate players in the association. The PFAJ will be maintained through membership subscription of $15,000, earnings from conferences and seminars and sale of publications.
PORTABILITY AND VESTING
The PFAJ will be a company limited by guarantee, run by a board of directors who will be elected annually. The accounts will be audited annually. The PFAJ board members will work voluntarily but the secretariat will be paid.
On the question of whether an individual will be able to move his pension benefits and years of service from one company to the next before the agreed retirement age, Mr. Jones said this would be part of the next round of discussions.
Portability (movement of pension funds between companies), and vesting are important. In many parts of the world, where an employer has contributed to a fund over time and leaves the company before the vesting period, he is only entitled to his contribution. If he leaves at the agreed retirement age, he gets both. Vesting benefits the employer when the employee leaves before the stipulated period.
"We think both of the above issues should have been in the original document," said Mr. Jones, pointing out that this only applies to private companies and not to Government pensioners, since Government is paid from their revenues.
WHO CAN SET UP FUND
A pension fund can be operated out of any arrangement where an employer and employee contributes to a retirement benefit. It can be for as small as five in a company or even for persons employed in a household. Domestic helpers can also benefit as well as persons who are self-employed. The possibility of having two pension funds that is, with a company as well as through an investment manager, is under consideration.
OVERSEAS TRANSFER OF PENSION FUNDS
The Sunday Gleaner queried whether the Bill looked into the possibility of transferring pension funds overseas for beneficiaries who emigrate. Mr. Jones said that for years there were severe restrictions on the amount of pension funds that could be invested outside of Jamaica. However, "...the world is changing and I think pension fund management should change with it," he said.
ADMINISTRATOR'S ROLE
The Pension Funds Adminis-trator is the person who is responsible for paying out benefits, issue statements, manage investments and takes care of the administrative details of the pension funds on behalf of the pensioner
With so much money at stake, Mr. Jones hopes that the PFAJ will have a strong voice on behalf of those it represents. "I hope the new Act will not be rushed but we will see lobbying before it is passed."
Starting this month, prospective members of the PFAJ can visit the website: www.pfaj.org where they can download an application form.
