White Paper on pension reform tabled
THE Government tabled the White Paper on "the Reform of the Public Sector Pension System" in the House of Representatives on Tuesday.
The White Paper states that in keeping with the Government's commitment to the International Monetary Fund (IMF), the scheduled implementation date of the reformed public sector pension system will remain April 1, 2016. However, in the interim, legislative amendments will be put in place, as well as the enhanced administrative system.
Public-sector pension reform was one of the major prior actions under the agreement with the IMF which should have taken effect this year. However, the Government pushed back the time for public servants to start contributing in July, after it became obvious that the 2013 timeline could not be met.
The policy outlined in the White Paper, tabled by minister without portfolio in the Ministry of Finance and Planning, Horace Dalley, represents a position that accords with aspects of the joint select committee report tabled in Parliament earlier his year, while recognising that the current fiscal environment does not allow for funding of past liabilities.
Periodic reviews will be conducted to determine if pension increases can be granted, given the Government's fiscal standing.
Other features of the pension system include a 2.2 per cent accrual rate for workers 55 years and over; two per cent for workers 54 and younger; and 1.8 per cent for new entrants.
The salary to be used in the computation will be the average of the last five years, while lump sums are optional.
The Government is the largest employer of labour in Jamaica. Presently, 80,971 public sector employees may be eligible for a pension — 37,465 persons employed to Central Government, 16,835 employed to the security forces and 26,671 employed as teachers.
Currently, the public sector pension system is unfunded, in that no contributions are set aside in a discrete fund for the payment of those pensions. Instead,
pensions are paid on a recurrent basis out of the Consolidated Fund, in what is called Pay-As-You-Go (PAYG) system
As at 2011, pension payments represented 1.4 per cent of GDP or about five per cent of total Government expenditure.
Dalley told the House earlier this year that pension payments has moved from $17 billion to $22 billion over the last three years.