Pension coverage still too low
Published:Sunday | August 11, 2013 | 12:00 AM
Richard Browne, Business Reporter
A lock-in feature to prevent employees from accessing their pensions when they change jobs should be front and centre in efforts to increase pension coverage in Jamaica, according to Rezworth Burchenson, managing director of Prime Asset Management Limited.
Although the number of Jamaicans with private pension plans has recently increased by more than 7,200 people in the first three months of this year, only 7.62 per cent of the labour force is actually covered.
A total of 97,000 people have private pensions out of a labour force of 1.27 million.
"People change jobs and get their contribution back," said Burchenson. "This contributes to the low level of pension coverage," he said.
But under the lock-in feature, employees who leave their jobs will not be given the option, after a certain period, of reclaiming their pension contributions.
The lock-in feature is part of phase two of the pensions reform effort and was signed off on by the pensions industry five years ago, Burchenson said.
An additional factor to the low level of coverage, he said, is the number of companies with a large workforce which don't offer employees a pension plan.
Yet another factor is the number of pension plans that have been terminated.
Three plans were terminated during the first quarter of 2013, increasing the number to 329. Total asset values for terminated plans stood at J$10.47 billion, with 2,302 people affected. Overall, the private-pension sector is valued at J$296 billion.
Jamaica's pension coverage rate at less than eight per cent, compares to 39 per cent in Canada for workplace coverage and about 18 per cent for all private industry workers in the United States, which is down from 35 per cent in the early 1990s, according to the United States Bureau of Labor Statistics.