Pension professionals are again pressing for broader dialogue on the subject of pension reform to support economic growth and avert a poverty crisis, particularly among the country’s retired population, over the next three decades, according to a news release from the Jamaica National Building Society (JNBS).

Currently, approximately 40 per cent of Jamaicans contribute to the National Insurance Scheme (NIS), which at the retirement age of 65 years provides a fortnightly average payment of $5,600 or $11,200 monthly. And, only about 8.9 per cent of the employed labour force, which is estimated at just over one million people, are contributing to a bona fide pension scheme.

This is against the background that the population of people above age 60 and over will surpass the child population in approximately 30 years.

“Our country is growing old before it gets rich,” said Sharon Smith, consultant to the JN Individual Retirement Scheme (JNRS) at JNBS, pointing to the ageing population, who she said, given their low pension savings and planning for retirement, will become a burden to their children, other family members or the state.

“Therefore, as we discuss pension reform in the public sector, we need to seriously plan for the rest of the population,” she said.

Public sector workers are to pay five per cent of their salary for pensions come April; and parish councillors and parliamentarians six per cent, under the proposed Pension Reform for the public sector.

However, Smith said the discussion needs to be broadened to include the entire labour force and ways indentified to make pension savings an obligation for persons in the workforce.

Smith said the NIS should perhaps be treated as the first tier in a three-pronged system in keeping with World Bank recommendations, with the second level mandating all citizens to contribute to a private scheme or superannuation fund, and the third voluntary savings.

“We need to consider that, in addition to being a social safety net, a prudently managed pension system can spur economic growth,” Smith said in the release, pointing to the benefits achieved by countries such as Chile, where strong pension management has resulted in positive outcomes for the economy.

According to the World Bank, Chile was able to increase its gross domestic product by nearly five per cent between 1981 and 2001 by reforming the country’s pension system and increasing pension savings, the release said.

Citing the Chilean approach in the 1980s, Smith says that the Government of Jamaica should explore instituting a compulsory pension scheme to increase the savings under pension. And, beyond NIS payments, workers – whether they are employed by a company or self-employed – should make individual contributions to an approved pension fund.

“They should do both,” she posits, noting that persons already making contributions to a superannuation fund should also contribute to an approved private pension scheme. “Although the NIS is already mandatory, there is no penalty if you fail to make a contribution; and, in addition, there is a cap on what you can contribute and receive from the NIS at retirement,” she points out.

“The imposition of a mandatory pension is no different from imposing seat-belt or anti-smoking legislation,” said St Elmo Whyte, actuary and lecturer at The University of the West Indies in the release.

“I am merely advocating a law for the general good. It’s common sense, in that it benefits the pensioner in two ways: One, it guarantees a pension at retirement; and, two, it develops the country because the money has to be invested, which is equally important,” he said.

Whyte stated that the NIS could, for example, be increased to provide a retirement income of between 50 per cent and 75 per cent for minimum wage earners; however, people who earn above the minimum wage should be mandated to contribute to an approved pension arrangement, which falls under the Pensions Act (2004).

Reiterating the economic benefits, Smith said that pensions provide a pool of long-term funds, which can be used to invest in public infrastructure, community development, and, in the final analysis, increase the wealth of the country.

“These pension funds could be invested to upgrade health facilities, construct better rural roads, highways and other amenities, which a developing country needs to become successful,” she said.

“While we try to control our debt and mend other fiscal indiscretions, we must, at the same time, be looking at how we can fix our pension situation, so that we don’t have to deal with marginal or no financial resources for our ageing population, 30 years or six administrations later,” she cautioned.