PERSONS WHO have accumulated contributions in pension funds prior to the effective date of the proposed National Pensions Act, will still be able to access their contributions, with interest.
In a statement in the House of Representatives on Tuesday, following the tabling of the White Paper, "The Reform of the Pensions System in Jamaica", Michael Peart, Minister of State for Finance and Planning, said the proposed legislation would apply only to contributions made after the enactment of the law.
"I want to make it perfectly clear that the law will not be applied retroactively to contributions made before the date of enactment... The current rules of your scheme with respect to the refund of contributions on termination will continue to apply to the contributions made prior to the enactment of the law, indefinitely."
Below is a summary of other points made by Mr. Peart in the statement.
The objectives of the reforms outlined in the White Paper are twofold:
(i) First, to ensure that proper arrangements are made by and for Jamaicans during their working lives, so as to enable them to receive an adequate pension at retirement; and
(ii) Second, to create an effectively regulated pensions system in which the contractual savings arrangements are made more secure and profitable for participants.
The Financial Services Commission (FSC) will be responsible for the efficient regulation and supervision of entities dealing in securities, collective investment funds, investment advisers, the insurance industry and pension funds.
To this end, the White Paper on Pensions Reform outlines the provisions to be included in the proposed National Pensions Act. These provisions include:
(i) Licensing and registration requirements for Pension/Superannuation Funds, and Managers/Administrators of pension funds; (ii) full disclosure of information to the members of the Pension/Superannuation Fund and the Financial Services Commission; (iii) accountability of the Trustees and Managers/Administrators of such funds for their operation; (iv) investment limits; (v) enabling self-employed persons and persons in non-pensionable employment to provide for retirement income at levels commensurate with the provisions of Occupational Pension Schemes; (vi) funding for Parental Pensions by children; (vii) the voluntary indexation of pensions; and
(viii) the mandatory Preservation and Portability of Pension Rights.
In most other respects, the proposals in the Green Paper and those outlined in this White Paper are similar. Changes have, however, been made to reflect the wishes of the public with regard to the mandatory inclusion of employee-nominated Trustees, the development of provisions to facilitate the creation of a pension plan by parents for their disabled children, and the merger of the proposed Pensions Commission with the Financial Services Commission - the single non-deposit-taking financial institution regulatory and supervisory agency.
One other important change was made to reflect the concerns of the public. This was in respect of the proposed Vesting/Portability of Pension Rights. The Green Paper suggested that provisions be enacted to ensure that pension rights are automatically vested on termination of employment after the completion of a minimum five years membership in a Pension/Superannuation Fund. It was proposed that on termination of service on completion of more than five years membership, the members' pension rights must be preserved in the plan, or be transferred to another occupational plan or Approved Retirement Scheme he/she is joining, in accordance with the person's wishes.
The vesting of pension rights is central to the reform of the pension system in Jamaica, as it is necessary to ensure that persons make adequate preparations for their retirement. Currently, persons on changing jobs tend to opt for refunds of their own contributions, rather than opt for their accrued pensions to start at retirement age. These refunds are usually used for consumption during the employees' working lifetime, leaving many people when retired without sufficient resources to sustain them through to the end of their lives.
Mandatory vesting also seeks to ensure that persons receive the benefit of both their contributions and their employer's contributions in the form of a pension, even in situations when they change or terminate employment before attaining pensionable age. In most schemes, the refund of members' contributions is a lesser value than the accrued pension.
