The over 1,500 pension schemes now registered in Jamaica will, by April, have to satisfy new and more stringent licensing and registration requirements in order to continue in the business of managing the pension fund of their employees.

As part of the restructure of the industry that is now being contemplated by parliament, pension funds will eventually become portable - allowing employees to transfer their pension with them when they change employer, and will also have a defined vesting period.

Finance minister Dr Omar Davies is pushing for the amendments to the pension act to include portability and vesting - the latter giving pension scheme contributors the ability to claim benefits after the specific time period.

Last week, Fitz Jackson, state finance minister who is in charge of pension reform, updated hundreds of pensioners on the status of the bill that is to make the changes to the pension law.

"In the next financial year we can comfortably say that all will be in place legislatively and regulatory in the pensions industry," Jackson told the stakeholders at a meeting at the Jamaica Conference Centre in Kingston. "The bill is scheduled to go to the House on Tuesday of next week (yesterday) and we hope that shortly thereafter it will go to the senate without any or much delay."

Tabled in Parliament in December 2003, the Superannuation Fund and Retirement Schemes Bill is designed to reform Jamaica's pension system, creating a firewall against imprudent investments of pension funds.

Last week Davies said that the amendments currently before parliament did not go far enough and would be subject to more reviews in the future.

"The first phase of the legislation does not go as far as it needs to on the issue of vesting and it will sooner or later have to be addressed," noted Davies. "There are also specific issues relating to portability."

Added the minister: "While pensions represent saving, a pension fund is not a saving account and workers cannot simply tap into the pension fund, if and when they feel fit. It has to be built in such a way so there are funds available to support the pensioner, because the economy has too many persons who did not make appropriate provision for retirement period."

The Bill proposes that the Financial Services Commission (FSC) regulate and monitor the pensions industry.
Last week, Brian Wynter, the executive director of the FSC, said that once the act was passed, his agency would outline the mix of instruments that would be allowed for investment in pension funds.

At last week's meeting, stakeholders expressed concerns about the proposed penalties - as much as J$5 million for unlicensed pension schemes. They were concerned about the conditions that could lead to an existing pension plan being disallowed under the new act. If disallowed, the FSC would decide how the scheme would be dissolved.
Among the new registration requirements of pension plans:

. that on death, the maximum lump-sum payment will change from a ceiling of $120,000 to a ceiling of two years' salary, matching the benefits of civil servants;

. that the maximum sponsor contribution should be 10 per cent of a member's annual salary or wages in a superannuation fund (a pension plan offered to staff);

. no more than 20 per cent of member's annual salary or wages for a retirement fund (a business which sells pension plans);

. a sponsor can make special contributions in order to meet minimum solvency and funding requirements.

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