State pension fund NIF grows to $120b
The National Insurance Fund, NIF, a scheme operated by the Government to pay pensioners, saw double-digit growth of 13.6 per cent in the past financial year, due mainly to the performance of its equity portfolio.
As at March 2019, the fund’s assets were estimated at $120.7 billion, compared with $106.2 billion in 2017-18.
This increase of $14.5 billion was driven primarily by the performance of the equity portfolio which climbed 31.3 per cent in value, the Ministry of Labour and Social Security indicated in its annual performance report tabled in Parliament.
The ministry said, however, that growth was tempered by the revaluation of the Jamaican dollar by 5.98 per cent.
For the fiscal year under review, investment in securities increased by $12.4 billion or 15.2 per cent – moving from $81.6 billion in the previous year to $94 billion in FY 2018-19.
Investments in property increased by $405.5 million or 2.7 per cent, the ministry said.
The fund has been renovating and expanding existing NIS offices, including renovation of the Hanover office, which was completed and opened on February 28 of this year. The project in St Ann’s Bay is complete, but the building needs to be outfitted for occupancy.
The NIF operates as the investment arm of the National Insurance Scheme, NIS, to which working Jamaicans are required to contribute a portion of their wages and salaries in exchange for a state pension at retirement. The proceeds of the fund are used periodically to increase NIS benefits.
The NIF operates as a division of NIS, but the Ministry of Labour is weighing whether to split off the pension fund as a separate entity.
NIS currently pays out pensions and other benefits to 120,428 persons. The agency added more than 52,400 contributors to its rolls last fiscal year, but information on the total number of persons on the roll were not immediately available.
The labour ministry’s performance report indicated that net contributions collected under the National Insurance Scheme for year ending March 2019 registered a negative balance of $2.1 million. It means the fund paid out more in pensions and benefits than it collected in contributions in the same period – an issue that has been of long-standing concern because it raises questions about the future viability of the pension system.
The ministry mentioned in its report that “the scheme’s operations continue to experience a deficit on an annual basis” and that NIF continues to assess the asset allocation within the fund to ensure that it is appropriately diversified to deliver on its mandate of maximising returns, with acceptable levels of risk, to facilitate the timely payment of benefits.
At more than $120 billion in assets under management, the state pension fund is a fifth of the size of the private pension market that was valued at more than $600 billion in March. Insurance regulator, the Financial Services Commission, says more than half or $316.6 billion of private pension funds are managed by three insurance companies. The companies were not named, but Sagicor Jamaica is known to be the market leader.
Private pension savings is contributed by just 9.8 per cent of the labour force.