THE Statistical Institute of Jamaica’s latest Labour Force Survey found that the unemployment rate in Jamaica, as at April 2023, stood at 4.5 per cent. Also in April 2023, youth unemployment was approximately 12 per cent.

But with nearly 20 per cent of the working population having a pension plan, temporary or contract workers face a looming retirement crisis as many of them do not contribute to a pension plan and are denied employee benefits that full-time or permanent staff enjoy.

Speaking earlier this year at the 2023/2024 Budget Debate, Minister of Finance Nigel Clarke reported that more than 20,000 government employees are contract workers, and announced that these workers’ employment status would be regularised into permanent employment status within the public service. He also reported that 80 per cent of medical doctors employed in the public sector are on contracts that are renewed periodically. He said the reform of contract work within the public sector over a period of three years is scheduled to be completed by the fiscal year 2025/2026. The implementation of the reform will see contract workers’ employment status changed to permanent employment.

Let’s examine the implications of retirement planning for the current temporary/contract workers (in both the public and private sectors) who have not been contributing to a pension plan or who are not currently entitled to a pension benefit from their employers. Within the public sector, employees who will be retiring within three to five years’ time without a pension in place will face a retirement dilemma. Traditionally, many employees worked in the public sector for five, 10 years or more without being eligible for a pension.

I have spoken with human resources professionals who pointed out the challenge they face in encouraging contract workers to start a pension plan. Many of these employees are reluctant to start a pension plan. They continue to work hoping that someday their employers will offer them permanent employment status. Unfortunately, for some of these workers that “some day” didn’t arrive and after many years of employment they retire without any income in retirement. Some contract workers are paid a gratuity upon retirement, but even that is not enough to last in retirement.

The Approved Retirement Plan (ARP) or Approved Retirement Scheme (ARS) is easily available. Employees can contribute a maximum of 20 per cent of their income to an approved pension plan. It doesn’t cost much to get started. At BPM Financial Limited, an employee can open a pension plan with a minimum of $2,000, so affordability is not an issue. The approved pension plans are transferable or portable, therefore employees can move pension plans from one entity to another. It’s important for employees to think of their future. What kind of lifestyle do you want to enjoy in retirement? Where will earnings come from to replace the income earned during the working years? Ideally, it’s recommended that you should retire at a minimum of 80 per cent of your pre-retirement income. This means whatever your last pay cheque was prior to retirement, your pension income should be 80 per cent of that. In reality, though, some people may need 100 per cent of their pre-retirement income in order to maintain the standard of living they had prior to leaving the workforce. An experienced and professional financial advisor can help in assessing how much funds you will need in retirement and how much you should save to reach your goal. Some human resource practitioners are faced with the daunting task of attending to former employees who have retired without a pension and have fallen on hard times. Contract workers in particular need to be cognisant of the consequences of failing to plan for retirement.

Because no one can accurately predict what the cost of living will be in five or 10 years’ time, it is necessary to factor in the impact of inflation on your savings or investments. Always save and invest to supplement your pension income. If there isn’t a pension plan in place then it’s best to have a diversified investment plan in place for emergencies or short-term goals and long-term objectives, such as buying a home and having a retirement income.

Some lower-paid workers are employed under fixed-term contracts (FTC). These employees risk their contracts being terminated arbitrarily or not renewed. Pension planning for this category of workers is very important as many of them may be temporarily employed for many years with little or no benefits. Being employed should be much more than having a job. It should encompass the total well-being of individuals, securing for them a future that brings the reward of peace of mind after many years of sweat, toil, and sacrifice.

Grace G McLean is financial advisor and retirement specialist at BPM Financial Limited. Contact her at gmclean@bpmfinancial or visit the website: www.bpmfinancial.com. She is also a podcaster for Living Above Self. E-mail her at livingaboveself@gmail.com