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Pension crisis!

• Most Jamaicans employed today to retire without proper pension ?• Only 40 per cent now contributing to NIS

BY CONRAD HAMILTON Sunday Observer senior reporter ?hamiltonc@jamaicaobserver.com

Sunday, August 12, 2012    

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EIGHTY-two per cent of the current private sector workforce will have nothing but the state-run National Insurance Scheme (NIS) pension benefits to live off when they retire.

These latest figures have served to alarm the country’s trade union leaders and key functionaries in the Ministry of Labour and Social Security who are becoming increasingly worried about the future of thousands of Jamaican workers who are likely to retire without a pension.

In what is being dubbed “a crisis of immense proportions” one senior member of the country’s trade union movement is predicting that the Government will have to construct additional infirmaries to accommodate thousands of Jamaican workers who will be unable to fend for themselves in their twilight years.

According to information from the Statistical Institute of Jamaica (STATIN) the Government employs just over 140,000 workers, while another 500,000 are employed in the private sector. In addition, STATIN explains that close to 400,000 persons are selfemployed.

Keith Comrie, head of the public sector committee of the Jamaica Confederation of Trade Unions (JCTU), says he is particularly concerned about the large number of workers in the private sector whose quality of life will be severely compromised when they retire.

“Do you know that is only 15 per cent of people in the private sector receive pensions? I believe that the unions that represent private sector workers should work harder to secure pension for their workers. The security guards, for example, don’t get a pension, even if they work until they old,” said Comrie. He pointed to the inadequacies of an archaic system under which some companies pay retired employees one month’s pay for each year of their service. This, he says, is in stark contrast to what is paid to workers who are members of established pension schemes, who, upon retirement, receive a lump sum payment, in addition to monthly payments until they die.

According to Comrie, many persons who are now employed to private enterprises will only take home benefits from the state-run National Insurance Scheme (NIS), which currently grants retirees a maximum weekly sum of $2,400.

He pointed out that the NIS allocation will not be enough to cover the living expenses of retirees, many of whom will have higher medical expenses. He argued that their plight will be further exacerbated by the fact that many retirees are living much longer. He added that because many members of the workforce are having fewer children, they will be less likely to benefit from care or financial assistance from offspring.

“They can’t depend on the NIS because what some people getting now from NIS can’t do nothing,” said Comrie.

When the Jamaica Observer sought to contact the Social Security Ministry for a confirmation of the figures provided by the trade unionist, a senior official of that ministry painted a far more dismal picture of the situation that will confront thousands of persons who have not made plans for their retirement years.

Faith Innerarity, director general in the Ministry of Labour and Social Security, said she is extremely concerned about the welfare of thousands of self-employed persons, including farmers, barbers and vendors who will not be able to collect NIS benefits when they retire.

According to her, these individuals, for a variety of reasons have not been contributing to the NIS fund. Under existing guidelines, selfemployed persons are required to make weekly contributions of $50 for at least 10 years in order to qualify for a pension from the NIS.

“Part of the difficulty that we have in Jamaica is that such a high proportion of our workforce is in the informal sector and even for the National Insurance Scheme itself, we estimate it’s only 40 per cent of the labour force that is actually contributing to national insurance.

“So although the scheme is there for everyone 18 and above, gainfully employed, only 40 per cent of the labour force is contributing to the NIS. The fact is, a number of persons do not pay sufficient attention to planning for retirement,” Innerarity explained.

She reiterated claims by trade union leaders that only a very small percentage of private sector workers are members of contributory pension schemes set up by their employers.

“Of the private occupational and individual pension schemes regulated by the FSC (Financial Services Commission), it is estimated that these schemes have only about 68,000 members and this represents only six per cent of the employed labour force,” Innerarity added.

She disclosed that public education initiatives are under way to get more workers to pay their NIS contributions, and to explore other avenues through which they can put away some of their earnings for their retirement years.

For the director general, too many workers are simply ignoring the need to make provisions for their retirement. While acknowledging that some workers might not have much disposable income, Innerarity says the concept saving for ‘the rainy day’ must be embraced.

“There is a gap between the knowledge and the actual behaviour; people are aware, but sometimes they put off doing these things. Some might say that retirement is a little way ahead and to be frank, too, persons are probably so concerned with immediate consumption needs they put retirement, in a sense, on the back burner because they are seeking to meet their immediate needs,” Innerarity explained.

While acknowledging that the prospects are much brighter for most public sector workers, Comrie indicated that some public servants will go home without a pension, due to what he cited as technicalities which, more often than not, are not disclosed to them until they encounter difficulties claiming retirement benefits.

He pointed to the many persons who work for years without being confirmed in their posts, and would, in effect, still be ‘temporary’ or ‘casual’ at the time of their retirement.

“We are concerned about the status of many workers; some of them work for years and then they are told that they were not on the [public service] establishment. You have many of them working at schools, for example, who are paid by the Government, and who have worked for many years, but still cannot collect a pension when they retire.

“Another thing is that a number of people are being asked to change their jobs to contractual jobs and when they go on contracts, they have no pensions, so you soon find the infirmaries full over the next five to 10 years,” Comrie warned.

But for Chief Executive Officer of the Jamaica Employers’ Federation Brenda Cuthbert, retirement planning is a serious issue which must be examined by both employers and workers. According to her, more companies in the private sector have introduced pension schemes since the passage of legislation in 2005, and have been encouraging or mandating workers to join such schemes.

However, she argued that Jamaican workers should view retirement planning as part of their responsibilities and should also explore different options, including putting away something for their retirement years.

Beverly Hall-Taylor, the executive director of the Jamaica Council for Senior Citizens, is also endorsing calls for more Jamaican workers to save. She told the Sunday Observer that the council, as part of its efforts to commemorate Jamaica’s 50th year of Independence, is leading a campaign aimed at encouraging workers to plan for their retirement. She explained that the islandwide campaign will target workers aged between 35 and 60.

Meanwhile, head of the Trade Union Education Institute at the Mona campus of the University of the West Indies, Danny Roberts, says the Government will have to provide more leadership in the area of getting more members of the workforce to embrace retirement planning.

Roberts, like Comrie, is also proposing that the Government provides increased welfare benefits to workers when they retire.

According to him, many countries have embraced the idea which is also receiving support from international organisations such as the World Bank and the International Monetary Fund (IMF). He noted that this change in posture will make it easier for countries like Jamaica to introduce better welfare programmes for retired workers.

“That is why we have long been advocating that one of the things we need to look at, as the world is looking at it — primarily through the International Labour Organisation (ILO) — is the whole question of minimum social security flooring. The World Bank and IMF realise that in this global crisis you have to have social protection flooring. That was one of the items discussed at the recent ILO conference,” said Roberts, a former vice-president of the National Workers’ Union (NWU).

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