FOR decades scores of Jamaicans have shied away from getting enrolled in an approved pension scheme, instead planning for their children to support them during their golden years.

But officials of the Pension Industry Association of Jamaica (PIAJ) and the Insurance Association of Jamaica (IAJ) have warned that this is a plan fraught with danger.

“It has been a cultural thing from generations past, that we don’t need to save for pensions because we have children who are coming up; we have a lot of children who [will] take care of us. What is happening then, is that we are putting the burden on the next generation, who will have to save for their own pension, plus take care of their parents and it can’t be a sustainable thing,” said Desmond Johnson, director of the PIAJ and chief executive officer/chairman of Firm Insurance, one of the participants at the latest Jamaica Observer Monday Exchange.

And it is not just pensions, Johnson pointed to data that more than 70 per cent of Jamaicans have no form of life insurance, and more than 80 per cent of private sector workers are not enrolled in an approved pension scheme.

“What it means is that 23 years from now, most of those persons will be retiring without a pension benefit…they will be dependent on the Government, which [will cause] a social problem, an economic problem, or they’re going to rely on their children…and given what is happening with the birth rates going below two…it is going to be a serious burden on the Government, and on the social system,” Johnson added.

A lack of financial literacy, misconceptions about the cost of insurance policies, and an aversion to saving versus immediate consumption have repeatedly been pointed to as some of the reasons for the low uptake in insurance and pension schemes by Jamaicans and Everton McFarlane, executive director of the IAJ, pointed to countries like Singapore, which mandates certain types of savings for its citizens, as proof that there is a cultural difference in how Jamaicans approach their golden years.

McFarlane argued that Jamaicans must be receptive to the idea that saving for a rainy day is just as important as consumption.

“There is the perception that it is an affordability issue, there’s not an affordability issue, there is a priority issue…The average insurance premium in Jamaica is $6,500 a month…when you compare that with the expenditure in other areas, it’s really just a question of priority,” charged McFarlane as he addressed Observer editors and reporters.

Dismissing the idea that insurance is only beneficial after death, McFarlane noted that this is an important tool to be utilised during life.

He pointed out that living benefits make up a large portion of payments from insurance companies to their customers.

McFarlane noted that in 2022, insurance companies operating in Jamaica paid out $4.6 billion to customers who surrendered their policies before maturity, and a further $12.9 billion to customers who encashed, or pulled a portion of their money from their policies.

In the meantime, president of the IAJ and principal officer of Cuna Caribbean Insurance Rosemary Henry urged Jamaicans to consider how they will survive after retirement without planning for the future.

“We are living longer and, therefore, we have to make plans as to how we are going to live when we are living longer. Nobody wants to not be able to have, well, not exactly the same, but a good standard of living when they are older, right? And remember, children are no pension, not in this day and age,” said Henry.

“You must begin to think how it is that I protect myself and make sure that I can have some quality of life when I get older,” added Henry.

Meanwhile IAJ director and managing director of JN Life Insurance Hugh Reid argued that there is a need for a major public education campaign to encourage Jamaicans to enroll in pensions schemes and to understand the value of insurance.

“It is important that we take the view that the deferral of consumption is going to help us. Some of these people, they look at their relatives or they look at people, and they [see how] they are suffering in their old age, and some of them don’t make the connection because, of course, they are young,” said Reid.

The IAJ and the PIAJ are now devising strategies to encourage particularly young Jamaicans to enroll in pension schemes and to get insured.

McFarlane told the Monday Exchange that this will be a four-pronged approach including product customisation — where the insurance industry designs products that suit the needs of the various segments of the population in terms of protection and savings.

The other prongs will be education and awareness — which involve creating opportunities to increase financial literacy across different sectors, including schools; stakeholder collaboration — which includes broadening the network that can be used to increase financial literacy, via partnerships with regulators, schools, churches, civil society groups, grass roots organisations; and digital transformation — leveraging tools like social media to drive up marketing and other instruments to create seamless user technology while keeping costs down.