MINISTER of Finance and Planning Dr Omar Davies said Wednesday that the government will reduce the 0.1 per cent of assets registration fee required from pension schemes and superannuation funds under the new Pensions Act, once the size of the industry has been ascertained.

“After that first cut, where we have registered these entities and we have clear ideas as to the value, the total amount being managed, etcetera, then we will make whatever adjustments are needed. We have done this before. But (right now) we don’t know the size of the industry, we just don’t know,” Dr Davies told the House of Representatives as it debated two amendments to the Act as well as a number of changes to the Regulations promulgated by a Senate committee which reviewed the provisions, recently.

Davies, who is expected to be returned as finance minister when new prime minister Portia Simpson Miller names her Cabinet today, said that he was giving a formal undertaking to Parliament to reduce the fee if the amount collected exceeded the cost of the regulatory work to be done by the Financial Services Commission (FSC).

He was responding to a concern raised by Opposition Leader Bruce Golding that the government would earn approximately $125 million from the fees which far exceeded the cost to the FSC of regulating the industry.

“What are you going to do with it? If it is to provide resources for the FSC to do the oversight what are they doing with $125 million a year?” Golding asked.

He said that the reason why he was concerned about the matter, was that the money was coming out of the pension fund.

“That money is coming out of the pool to which the workers who contributed will eventually get their pension,” the opposition leader said.

He said that the JLP was not against the fee paying the cost of the regulation but, “what are they going to do with the balance that keep piling up in an account”?

Minister of State in the Ministry of Finance and Planning Fitz Jackson, who piloted the bill, said that the fee was “very, very small” compared to other professional fees charged in the pension industry.

“My research indicates that those charged by professionals range from .58 per cent to 1.73 per cent of the asset base of these pension schemes. So the .1 per cent being charged by the regulator, which covers the cost of the regulation of the industry is comparatively very small and allows for the regulation of the pension industry without calling on the Consolidated Fund,” Jackson said.

“We have given the undertaking that, like we do for general insurance, once the fees can be reduced, they will be accordingly reduced over time,” Jackson added.

However, Jackson rejected a proposal from opposition MP Delroy Chuck, that the 0.1 per cent fee should carry a cap instead of being across the board.

Jackson said that government intended to employ the best available staff for the FSC and the highest level of regulation.

He said that the Act would also significantly reduce the administrative burden of the industry in terms of the number of forms required to fulfill the obligations of the management.

According to Jackson, government did not wish for the amendments and the regulations to become a contentious issue and had established, from the beginning, that this was only the first stage of the pension reform programme. The second phase, he added, was likely to be completed by the end of the current calendar year.

The Pensions (Superannuation Funds and Retirement Schemes) Act, which provides for the management of superannuation funds and retirement schemes, was passed by the House after more than a year of deliberations which resulted in two amendments to the year-old bill and a number of changes to its regulations.

The amendments provide for trustees charged with dereliction of their duties should face civil and not criminal charges, especially because this may happen notwithstanding their exercise of reasonable care and due diligence; and to modify the requirements for companies seeking to be licensed as investment managers of superannuation funds to be licensed securities dealers.

Changes to the regulations include restriction on self-investment; aggregated reporting forms of all entities reduced from a total of 85 to 26 pages; requirement for trustee meetings reduced from four times per year to once per year; the criteria for requiring plan audits modified to apply to pension plans with 100 or more active members and $75 million or more in assets, thereby reducing – from 46 per cent to 27 per cent – the estimated percentage of pension plans which must provide audited financial statements to the FSC.

-balfordh@jamaicaobserver.com