- FileDr. Omar Davies addressing the House during Budget Debate.
McPherse Thompson, Staff Reporter
THE FINANCIAL Services Commission (FSC) is to be given the power to license managers of pension funds as part of the reform to the regulations governing retirement benefits.
The Government has decided to initiate legislation to that effect, primarily because of opposition by a group of trade unions to vest pension benefits in a superannuation or pension fund, rather than paying the funds to employees when they terminate their employment with a firm.
Finance and Planning Minister Dr. Omar Davies, who made the announcement last Thursday, said he has asked Brian Wynter, executive director of the FSC, to move forward with the technical work to get the legislation in place.
However, speaking at the official launch of the FSC at its Barbados Avenue, New Kingston, offices, Dr. Davies said the move to license pension fund managers notwithstanding, "we will have to, sooner or later, return to the issue of vesting."
Specifically addressing officials of the financial services sector who attended the FSC's official launch, the minister pleaded with those "particularly in the insurance companies which have traditionally been involved with pension fund management," to take a stance on vesting.
The Government has proposed that under the reform to the pension legislation, provisions would be made to ensure that pension rights were automatically vested on termination of employment after the completion of a minimum five years membership in a pension/superannuation fund.
According to the proposal, on termination of service on completion of more than five years membership, the members' pension rights would be preserved in the plan, or be transferred to another occupational plan or approved retirement scheme, in accordance with the person's wishes.
The vesting of pension rights is central to the reform of the pension system in Jamaica because of the necessity to ensure persons make adequate preparations for their retirement.
At the function, Dr. Davies noted that pensions regulation was a critical element of the work of the FSC, for which the legislative amendments had not yet been put in place.
"The fact is that we did not anticipate that we would have had the difficulty with which we are faced," the minister conceded.
He said that until now there has not been any specific pensions legislation, and when the Government envisaged the introduction of a Pensions Act, the critical element was the matter of vesting.
"We did not anticipate what I think is a misguided and short-sighted viewpoint, whereby there has been some opposition from a small number of trade union leaders to the act of vesting," he said.
"It makes no sense for us to proceed with a comprehensive reform of the pension legislation unless vesting is included, because if you look at the statistics - strange as it may seem - Jamaica has an ageing population, and increasingly the matter of how the aged will be taken care of is not going to be just a social issue but a major economic issue," Dr. Davies said.
It was against that background that the Minister urged "the insurance companies and those who would wish to be involved in the management of pension funds to take a stance on this issue. It's not just a Government issue, it's an issue which impacts on the whole society," he said. "I urge persons to take a look at the proposed legislation which has been developed... I think it's imperative that persons - professionals and special interest groups - who have an interest in this legislation to take a stance on the matter of vesting."
However, given the opposition and the need to move on, the administration has decided to pursue the reform process by first initiating legislation "which gives the FSC actual legal authority to go about licensing managers of pension funds and certain basic things which we need to have done," Dr. Davies said.
According to the Minister, "I have recently started looking at the demographic statistics in terms of ageing and there are clear implications which we have to take on board in terms of how we provide for the mass of the population." Noting the FSC would be central to "a fundamental piece of work that has to be done," Dr. Davies said, however, that "apart from the work of the Government, apart from the work of the FSC, I'm urging members of the sector to become involved."
