Brian Wynter

The Financial Services Commission (FSC), which will soon turn its attention to regulating the multi-billion pension funds industry, says that pension funds managers ought to create an umbrella organisation to conduct discussions with the agency.

"The FSC is actively encouraging interests in the pensions business to come together and form an appropriate organisation to facilitate dialogue and consultation with the FSC as we work on the details of how we are going to best regulate the pensions business," Brian Wynter, the executive director of the FSC, told the Business Observer.

Wynter's comments have come just months ahead of the expected passage through Parliament of the proposed National Pensions Act.

The new law would bring major changes to how pension funds operate, including the establishment of prudential ratios to regulate how and where they invest their assets. But among the more controversial changes being proposed is the introduction of an automatic vesting clause for pensions. This will prevent an employee from encashing his own pension contribution when he is leaving his employer.

Wynter, in his interview with the Business Observer, declined to go into specifics of how his institution will shape the pension fund industry, saying only that the agency was being beefed up to take on this latest task.

However, in an explanation of some of the changes being proposed for the industry, the Ministry of Finance said that the vesting of pension rights was "central to the reform of the pension system in Jamaica."

Under the proposal, an employee who works at an organisation for at least five years, will not be able to cash in his pension contribution if he quits the job. The pension rights will become portable --allowing the contributor to transfer these rights with him to another job, plan, or approved retirement scheme.

Explained the finance ministry: "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 where they change or terminate employment before attaining pensionable age. In most schemes, the refund of members' contributions is of a lesser value than the accrued pension."

The FSC, which was created two years ago to be the super-regulatory body for the non-banking financial sector, has already put in place regulations for investment dealers and advisors, and has been working with the life insurance industry to establish rules and regulations to govern that sector.

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