During the Tuesday, July 23, 2019 sitting of the House of Parliament, Hon. Minister of Finance and the Public Service Dr. Nigel Clarke moved amendments to the Pensions (Superannuation Funds & Retirement Schemes) (Investment) (Amendment) Regulations, 2019 which have now been adopted by the House of Representatives. These amendments will broaden the range of permissible assets in which pension plans can invest and strengthen the legislative framework with respect to safeguarding the assets of pension plans.
Upon passage in the Senate, pension plans will now be permitted to invest in the following, among other assets:
(a) Bonds (i.e. unsecured debt) issued by companies that have an investment grade rating from a recognised rating agency.
(b) Bonds (i.e. unsecured debt) issued by companies listed on the Jamaica Stock Exchange. These companies are subject to mandatory accounting, disclosure and governance standards, and the amendment corrects a gross and longstanding anomaly where pension plans could invest in equities of these listed companies, which are junior securities, but not unsecured debt issued by the same companies even though these have a senior claim on the assets of the company compared to the company's equity securities.
(c) Equity or debt of private companies, established under the laws of Jamaica, provided that in aggregate these amounts do not exceed a maximum of 5% of the assets of the pension fund. This will allow pension funds to invest in private equity and venture capital for the first time.
Minister Clarke noted that "These amendments will provide higher return investment opportunities for pension funds while improving access to finance, deepening capital markets and providing options for financing outside of the banking sector." The amendments also revise investment concentration limits and increase the amount that pension funds can invest in secured leases.
The amendment to the regulations strengthens the regulatory framework and requires each pension plan to develop an investment policy and mandates investment managers to invest pension fund assets in a manner consistent with the individual plan's investment policy, the governing legislation and the regulations. The amendment plugs a perceived ambiguity with Type II Pooled Funds (where pension funds pool assets to former a larger fund) and explicitly requires that the investment limits in the regulations also apply to Type II Pooled funds.
Dr. Clarke "Mr. Speaker, as we move into a new regime that's underpinned and anchored by macro-economic stability, where the Government's appetite for debt is reduced and where Pension Funds have funds they need to invest, it is necessary to broaden the range of assets that pension funds can invest in. Furthermore, in this new era of low, stable and predictable inflation pension plans will need to be able to invest in higher returning longer term assets to be in a position to fund their pension liabilities. These amendments will allow for this."
In his presentation, Minister Clarke expressed gratitude to the Financial Services Commission, the Ministry of Finance's financial regulatory division and the Office of the Chief Parliamentary Counsel for the work done to get to this stage; to Jamaica's multilateral partners CARTAC and the IMF for the technical assistance; and to the Pension Fund Industry Association and Opposition Spokesman on Finance, Mr. Mark Golding for the comments provided during the process.
The Pensions (Superannuation Funds & Retirement Schemes) (Investment) (Amendment) Regulations, 2019 which are to be approved in the Senate at the next opportune sitting, can be found on the Houses of Parliament Website.
For further information contact:
Communication & Public Relations Branch
Ministry of Finance and the Public Service
30 National Heroes Circle
Tel: (876) 932-4656/4660/4655
Contact: Elaine Oxamendi Vicet / Daniel Passley