Phillips tables public sector Pension BillWednesday, November 25, 2015
BY BALFORD HENRY Senior staff reporter firstname.lastname@example.org
MINISTER of Finance and Planning Dr Peter Phillips on Tuesday tabled in the House of Representatives the Bill paving the way for a defined pension contributor scheme for public sector employees to be paid from a pension fund.
The Bill's Memorandum of Objects and Reasons points out that, according to the Constitution, pensions, gratuities and other allowances granted in respect of the public service should be charged on and paid out of the Consolidated Fund.
However, the new Bill, the Pensions (Public Service) Act 2015, establishes a defined benefit contributory scheme, which contemplates the establishment of a pension fund into which all contributions made by pensionable officers and contributions from the Government, as an employer, shall be paid.
The Bill seeks to amend the Constitution to provide for the payment of pensions, gratuities and allowances out of the pension fund which is to be established.
Jamaica's pension reform process has evolved over the past three decades, but accelerated and became a priority after the meltdown of the financial sector in the nineties.
The crisis caused the Government a huge increase in debt financing to support the sector and led to extensive financial reforms.
A White Paper on the reform of the public sector pension system was tabled in the House of Representatives on December 17, 2013, by then minister with responsibility for public service, Horace Dalley.
According to the White Paper, the need for reform resulted from the recognition that the existing system had become fiscally unsustainable, thus rendering it unaffordable.
Currently, public servants, such as police, teachers and central government workers, are awarded pensions through an unfunded Defined Benefit system. These benefits are determined by a prescribed formula.
A Joint Select Committee of Parliament was established to review submissions from stakeholders and interested parties, and to address concerns over the recommendations of the Green Paper.
Under the reformed system, all workers will be required to contribute five per cent of their salary toward their pension. Also, all workers will begin paying contributions at a date to be determined by Cabinet.
The White Paper also noted that, in the new system, the pension benefits will be computed using an average of the final five years' salary. Pension benefits are presently computed on final salary.
The existing retirement age of 60 will be gradually increased to 65 years by one year, each year starting in April 2016. On retirement, workers will be given the option to receive one quarter of their pension benefits with a reduced pension or full pension benefits.
In keeping with the Government's commitment to the International Monetary Fund (IMF) under Jamaica's Economic and Financial Policies, the scheduled implementation date of the reformed public sector pension system will be April 1, 2016.
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