Ideally, retirement is the time in your life to indulge in hobbies, travel, spend time with loved ones and engage in activities which had been deferred while you were too busy working, raising/educating children and advancing careers. Achieving these retirement goals cannot happen by chance or wishful thinking. It is attainable by conscious and realistic planning which must begin as early as possible. The earlier this planning is effected, the less burdensome and more attainable the retirement goals will be. Adequate retirement planning assumes that the basic needs such as food, shelter and increased health care costs are taken care of with sufficient capacity to allow one to indulge in some of the deferred activities of your working life.
Planning for retirement is made easier by the availability of various pension savings options. These savings options aim to assist the saver to achieve retirement goals by utilizing available tax benefits. Segregating pension savings prevent them from being used for more short term consumption.
Pension savings should constitute a significant portion of the net worth of the average employed/self-employed person. With life expectancy increasing, the retirement years are also increasing and a well planned retirement plan represents the difference between financial security and comfort on retirement and a marginal existence during these years.
Individuals can save towards their retirement through Superannuation Funds and Retirement Schemes. A Superannuation Fund is a pension plan established by an employer for the benefit of his employees. On the other hand Retirement Schemes facilitate self employed persons and those persons who are not members of a superannuation fund and are not employed in pensionable posts.
However, saving for retirement is not limited to these pension arrangements. If an employee believes that his pension funds will not be adequate to meet his lifestyle needs on retirement he should investigate and invest in other investment arrangements which are available from financial institutions.
The Jamaican Government has through recent pension reform initiatives instituted a legal framework for the pensions industry which follows best practices in other jurisdictions. Under this new regulatory regime the FSC has been established as the regulator of the private pensions industry. As the regulator, the FSC’s role under the Pensions (Superannuation Funds and Retirement Schemes) Act (“Pensions Act”) and the Financial Services Commission Act, 2001 (“the FSC Act”) is to:
- i) regulate and supervise the operations of superannuation funds and retirement schemes that are approved and registered by it in accordance with the Pensions Act;
- ii) license administrators and investment managers
- iii) register trustees and responsible officers
- iv) carry out functions necessary for the proper administration of the Pensions Act;
The Pensions Legislation is designed to safeguard the interests of beneficiaries and ensure the efficient management of pension plans. Among the benefits of the pension legislation are the increased access to information given to members of pension plan as well as the opportunity for recourse to the FSC for those members of pension plans who believe that their pension benefits are in jeopardy.
Trustees, Administrators and Investment Managers of approved funds and schemes and other agents are held to a standard of prudent behaviour which will require them to exercise care, skill, and due diligence in the management and investment of pension assets.
Private pension arrangements provide coverage for roughly 60,000 persons only, out of a population of 2,692,400 and a labour workforce of 1,302,400 individuals . There is therefore a clear imperative for every Jamaican to save over the long term for retirement ,by participating in an pension plan and other appropriate vehicles as well as ensuring that those savings are adequate to meet their needs and provide the security desired
Whether you are in the early stages of your working life or nearing the retirement phase, planning for retirement is a very important and necessary activity.
There are some basic principles with regard to planning for retirement that should not be ignored. In particular, members of pension plans and all persons planning for retirement should:
- Conduct research and gather information regarding the retirement products available in the market; knowledge and financial security go hand in hand.
- Keep abreast of the performance of the pension fund, communicate with the trustees of the plan and ensure that the pension fund is operating in keeping with the Trust Deed and Rules and the Pensions Act. Seek expert advice.
- Act promptly, retirement planning should not be delayed, an early start is advisable.