FEES PROPOSED under changes to the pension law would amount to a new tax on retirees, says William McConnell, member of a Private Sector Organisation of Jamaica (PSOJ) committee studying the reforms.
The Government's original pension reform plan would actually have resulted in a 26 per cent cut in pension payments, according to attorney-at-law Raul Henriques, another member of the PSOJ committee.
Mr. Henriques told The Gleaner yesterday that actuaries determined that $150 million would have to paid to the Financial Services Commission (FSC) and possibly up to $800 million more needed to be paid out to cover other registration requirements.
TAXING PENSION FUNDS
"I don't believe any government would tax old people on their pension funds as is proposed," Mr. McConnell said. He said he had "an abiding faith" that if the issue was not addressed now, it would be changed at a later stage of the development of the legislation.
Pension schemes are formed by the establishment of an irrevocable trust and most company-administered ones are in surplus, Mr. Henriques said. The new regulations are supposed to enhance their efficiency and safety, but end up being overly burdensome.
The regulations would effectively nullify the rights granted under the original trust agreement, Mr. Henriques explained. An example of this is the curtailing of the freedom to wind up pension schemes where all parties concerned agree to the termination.
"This is quite a serious matter," Mr. McConnell said. "There is a body of law about how they (pension schemes) should operate." Trustees must be guided by the trust deed, he said. "Nobody should interfere."
Mr. McConnell said the proposed plans would have brought private pension operations to a halt, but public servants were very receptive to suggestions for changes. The lawmakers have said that they will re-examine the law if it does not meet the approval of industry.
"This draconian approach cannot continue, Mr. Henriques said. "There is a lot of cleaning up to do."
According to the Government, the need for a comprehensive reform of the pensions system in Jamaica has emerged because of the deficiencies of the current arrangement. Currently, there are approximately 1,500 registered pension schemes, which are either self-administered or pooled with Pension Administrators. However, no legislation exists to effectively provide for their regulation.
The report from the Senate committee that examined the bill was tabled on Friday.
