The Pension Industry Association of Jamaica (PIAJ) is upbeat about changes that have been made by the Bank of Jamaica (BOJ) expanding the allowable foreign currency (FX) assets available for investment by Jamaican pension funds and retirement schemes.
These changes, which came into effect on Friday, April 30, allows for the additional expansion of foreign currency assets to the investable pool of FX debt instruments that can be invested by pension funds and retirement schemes. The new investable pool of FX debt instruments, which the BOJ has allowed for investment by local pension funds and retirement schemes, include investment grade sovereign FX debt instruments.
This is in addition to investment grade corporate FX currency debt instruments issued by corporate entities incorporated outside of Jamaica. Also pension funds and retirement schemes can now invest in corporate FX debt instruments issued by corporate entities incorporated outside of Jamaica, which are guaranteed by an entity that is investment grade.
Corporate FX debt instruments among assets allowed for investment
Also investments can be made in grade corporate FX debt instruments issued by corporate entities incorporated in Jamaica that are earners of foreign exchange.
Prior to this, pension funds and schemes could only invest in foreign assets if they were debt instruments issued by the Government of Jamaica or issued or guaranteed by governments of the USA, UK and Canada.
In applauding the move by Jamaica's central bank, the PIAJ, which is the local pension funds and retirement schemes' lobby group, indicated that the move is the right one and comes at the right time. PIAJ President Sanya Goffe said: “the PIAJ is upbeat about the additional expansion to the investable pool of foreign currency debt instruments, as it will allow for more flexibility as well as and geographic and issuer diversification for pension fund.”
She noted that this should result in greater inflation protection and better returns for participants of pension plans.
“It is important to remember, however, that the expanded menu of allowable foreign currency investment instruments must be considered within the existing pension investment regulations that have attendant conditions,” Goffe, a career attorney and investment professional, explained.
Goffe indicated that the PIAJ has consistently been encouraging working Jamaicans to avail themselves of the benefits that are offered by saving for retirement through an approved pension arrangement.
“This latest adjustment will ensure that pension savers will benefit from a more robust and better performing sector which will redound well for Jamaica,” Goffe said.
Recent increase in allowable foreign assets limit
The BOJ's move to expand the allowable pension funds and retirement schemes FX investment options comes on the heels of the increase in allowable foreign assets limit to 10 per cent of the assets of a pension plan, up from seven and a half per cent effective April 1, 2021.
The PIAJ states that while this inclusion is a significant advancement, there was the expectation of the relaxation of both fixed income and equity options at a minimum but there is only flexibility for fixed income at this time.
According to Goffe, “we will continue lobbying for inclusion of other assets but this is a step in the right direction.” The PIAJ is a non-profit organisation that exists with the primary goal of lobbying for pension reform and greater retirement security and increasing financial literacy on pension related matters.