ENHANCEMENT OF THE BASIC SOCIAL SECURITY SYSTEM (NIS)

Changes in the Required Funding Levels
The Provision of More Meaningful Benefits
Unisex Retirement Age
Improving the Administration of the Scheme

REGULATION OF OCCUPATIONAL PENSION SCHEMES AND APPROVED RETIREMENT SCHEMES

REGULATING PENSION AND SUPERANNUATION SCHEMES

The Role of the Government
Enactment of Comprehensive Pensions Legislation
Licensing and Registration Requirements
Registration of Pension Funds
Information Requirements
Investment Criteria
Ownership of Assets
Trust Deed and Rules
Retirement Age
Beneficiary Designation
Plan Winding-Up
Offences and Penalties
The Creation of an Independent Regulatory Body
The Development of Provisions which Enable self-employed Persons and Persons in Non-Pensionable Employment to Effectively Provide for their Retirement
The Development of Provisions for Parental Pensions
Preservation of Deferred Entitlement/Portability of Pension Rights Indexation of Pensions

FEATURES OF THE REFORMS

The planned reforms to the Pension System have been designed so as to account for the peculiarities of the Jamaican economic and financial climate, and the socio-economic culture. The major goals of the reforms are expected to be achieved through the enactment of comprehensive legislation governing the pension system in Jamaica. However, a number of changes will also have to be made to certain sections of the National Insurance and Income Tax Acts, so as to ensure that a consistent legal framework will be maintained. As such, the reform of the Pensions System will to some extent, be a collaborative effort between the Ministry of Finance and Planning, and the Ministry of Labor, Social Security and Sport.

N.B. Normal criminal proceeding will continue to apply, and the Trustees' responsibility under Trust law will not be affected.

The major features of the reforms are as follows:

ENHANCEMENT OF THE BASIC SOCIAL SECURITY SYSTEM (NIS)

One of the factors in ensuring that persons receive an adequate pension throughout their retirement, is the development of an effective minimum compulsory pension plan. Such a plan, when applied universally, allows workers through mandatory contributions to save at least a minimal amount of their earnings for their retirement.

The National Insurance Scheme (NIS) was established in 1966 to provide the first level of basic retirement income. The scheme is inherently a minimum compulsory plan, which is universal, providing automatic coverage and compulsory contributions for employed persons, and the legal requirement that self-employed persons be registered contributors under the scheme. It also offers a wide range of retirement and death/disability benefits to retirees and their beneficiaries. Thus, through the NIS, the basic structure and principles of the desired minimum compulsory plan have already been developed and are operational.

However, it is well known that despite recent improvements, the flat rate benefits available from the NIS are grossly inadequate to meet even the basic needs of the average retiree. The problem is exacerbated by the administrative inefficiency, which plagues the scheme.

Although there have been periodic uplifts of the cap (that is, that portion of wages on which NIS contributions are levied and on which benefits are calculated), these have been infrequent. It is therefore necessary to enhance and further develop the NIS so as to enable it to provide the required level of service. Higher contributions and administrative efficiency are to be focused on as the means through which more meaningful benefits can be provided. The planned reforms have been structured so as to ensure that all existing rights under the scheme will be preserved.

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The enhancement of the NIS will involve:

Changes in the Required Funding Levels

The flat rate benefits available from the NIS are grossly inadequate to meet even the basic needs of the average retiree. This is largely due to the fact that the current NIS contribution ceilings inhibit the resources available for investment and payment of benefits. Therefore, although the National Insurance Fund is properly invested, the amount to be distributed on a continuous basis to the nation's retirees (both the elderly and the disabled) and their beneficiaries is unrealistic.

Currently, a wage-related contribution by the employees of 2 1/2% of their earnings is matched by an equal amount by their employers. This is subject to a maximum of $250,000 per annum ($20,833 per month/$4,810 per week) on the amount of salary from which the wage-related deductions are made. Thus, maximum contributions are $120 per week ($480 per month).

The mandatory contributions need to be modified in order to increase the amount of money that is invested in the NIF. Three viable methods of improvement are:

1. Retain the wage-related contribution by employees at 2 1/2% of salaries/earnings and employers at 2 1/2% but remove the existing cap for insurable wages; or
2. Retain the wage-related contribution by employees at 2 1/2% of salaries/earnings and employers at 2 1/2% and raise the cap for insurable wages from $250,000 per annum ($20,833 per month/$4,810 per week) to for example:

3. Raise the wage-related contribution rate to for example 3% salaries/earnings for both employees and employers and raise the cap to for example $999,960 per annum ($83,330 per month/$19,230 per week)

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The Provision of More Meaningful Benefits
One of the most significant achievements of the NIS is the wide range of benefits it has been able to offer, including:

• Old-age retirement pensions;
• Funeral grants;
• Invalidity and disablement benefits;
• Employment injury benefits;
• Maternity, special children's, and orphan's benefits; and
• Widow's/widower's benefits.

Most of these benefits are linked to the total contribution by and in respect of employees. Increases in contribution levels willautomatically increase the wage-related benefits. Periodical increases in the flat-rate benefits will also continue.

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Unisex Retirement Age
Presently the National Insurance Act sets different ages at which males and females may qualify for old age pensions, that is, ages 60 - 64 for females if retired, but age 65 whether or not retired, and ages 65 - 69 for males if retired, but age 70 whether or not retired.

It is proposed to unify the ages for the disbursement of old age pensions under the NIS by appropriate amendments to the Act. It is suggested that over a five year interval, starting at, for example, the year 2000, the minimum age at which women would qualify for old age pensions, should increase by one year, each year, so that by the year 2005 the minimum age at which both men and women would qualify for old age pensions, if retired, would be 65 and age 70 whether or not retired.

The table below illustrates:

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Improving the Administration of the Scheme

One of the most common complaints associated with the NIS is the inordinate length of time which persons are forced to wait between the claim and receipt of benefits.

In addition to the planned reforms, the Ministry of Labor, Social Security and Sports should be encouraged to develop means through which the administration of the scheme can be improved. This is with a view to significantly increasing the administrative efficiency of the scheme, ensuring that prudent management prevails, and enforcing the principle of accountability within the operation of the scheme.

More specifically, it is being suggested that the National Insurance Law be amended to include provisions which:

1. Require that pensions and benefits under the NIS be paid within a prescribed, reasonable amount of time; and
2. Subject the NIS to similar information requirements as will be enforced upon the Private Pension and Superannuation Schemes.

In addition to expediting the provision of benefits under the NIS, the planned reforms have to ensure that all the resources allocated to the NIF are collected. Here, the employer's role is integral, as he is the withholding agent, responsible to pay the contributions deducted from the salaries of his employees, as well as the required employer's contribution.

This is an obligation which has not always been taken seriously by many employers, often resulting in the misappropriation of large amounts of funds destined to the NIF. Hence, it is being suggested that the National Insurance Act be amended to include compliance provisions similar to those included in the GCT Act.

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REGULATION OF OCCUPATIONAL PENSION SCHEMES AND APPROVED RETIREMENT SCHEMES

Occupational Pension Schemes and Approved Retirement Schemes are the popular means used to supplement the benefits payable under the minimum compulsory plan. The second major feature of the planned reforms focuses on these schemes so as to ensure that all pension and superannuation schemes established in Jamaica will operate within an effective legal framework. The legislation will seek to protect the rights of the contributors and the retirees without inhibiting the possible array of schemes.

The reform will involve:

1. the regulation of pension and superannuation schemes covering private and public sector employees, including the introduction of mandatory vesting; and
2. the creation of funded schemes for Public Servants.

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More details are given below:

REGULATING PENSION AND SUPERANNUATION SCHEMES

The following areas are vital to the achievement of this objective:

The Role of the Government

One of the major objectives of the reform of the pensions system, is the governance of pension schemes established in Jamaica, to ensure accountability, solvency and the protection of contributors' and pensioners' interests. The commitment of the Government to this objective is reflected in the regulatory aspects of the system. This task involves setting the rules for the proper operation of the system, and enforcing them. More specifically, the Government will ensure that the following areas are addressed:

1. The Enactment of Comprehensive Pensions Legislation (The National Pensions Act);
2. The Creation of an Independent Regulatory Body (The Pensions Commission);
3. The Development of Provisions which enable self-employed Persons and Persons in Non-Pensionable Employment to effectively provide for their retirement; and
4. The Development of Provisions for Parental Pensions.

Enactment of Comprehensive Pensions Legislation

The legislation to be enacted must be sufficiently comprehensive so as to protect the members' interests, without stifling initiative. The following will be dealt with: Licensing and Registration Requirements

• All approved pension funds established in Jamaica must be registered with the Pensions Commission.
• All managers/administrators of Pension funds must be licensed.
• All trustees of Pension Funds must be registered by the Pensions Commission.
• Licenses/Registration can be canceled/revoked for cause/refused.

• the applicant's adherence to standards of sound business and financial practices in its operations;
• the ability of the applicant to meet the legislated fit and proper requirements with respect to key personnel.
• the strength and quality of the applicant's management;
• the adequacy of the applicant's capital.

• the person shall not have been convicted of an offence involving dishonesty, whether in Jamaica or elsewhere;
• the person is not an undischarged bankrupt;
• the person's employment record and business conduct and dealings do not give the Pensions Commission reasonable cause to believe that the person carried out any act involving dishonesty or impropriety;
• the person, in the opinion of the Pensions Commission, is of sound probity, is able to exercise competence, diligence and sound judgement in fulfilling his responsibilities in relation to the pension fund, and whose relationship with the fund will not threaten the interests of the members; and for the purpose of this paragraph the Commission shall have regard to any evidence that he has:
• engaged in any business practices appearing to the Commission to be deceitful or oppressive or otherwise improper, and which reflect discredit to his method of conducting business;
• contravened any provision of any enactment designed for the protection of the public against financial loss due to dishonesty, incompetence or malpractice by persons concerned in the provision of financial services, or in the management of companies or due to bankruptcy.
• the person is not mentally unsound.

Conditions for Registration of Pension Schemes

1. The pension scheme shall be established in Jamaica in connection with some trade or undertaking carried on solely or partly in Jamaica.
2. The pension fund is bona fide established under irrevocable trust.
3. The principal purpose of the scheme must be the provision of a pension (or an annuity) on retirement at a specified age or ages or upon earlier retirement as provided for in special circumstances.

• The specified normal retirement age shall not be less than age 60 years, with provisions for earlier/later retirement in special circumstances. Early retirement should be allowed no earlier than 10 years before the normal retirement age except on ill-health grounds.
• The maximum rate of pension accrual is 2% of final pay per year of service.
• The maximum pension must not exceed the limits Statutorily prescribed from time to time. It has been recommended that the maximum annual pension must not exceed the limit on retirement of 75% of salary (as defined in the Income Tax Act) at retirement after a minimum 37 1/2 years of service with the employer/employers, or proportionately less for shorter service.
• Pension increases may be granted above this level after the date of retirement, but not exceeding annual changes in the CPI.
• Lump-sum benefits may be provided on death, but must not exceed the higher of 2 years' salary and the member's contributions accumulated with interest.
• Lump-sum benefits on termination of employment:
  • vested member - nil
  • non-vested member - refund of the member's own contributions accumulated with interest.
• Lump sums at retirement in commutation of up to 1/4 of the pension should be allowed. The maximum lump sum should not exceed 12.5 x (1/4 of the pension). Small pensions may be commuted in full.
• Reckonable years of service with a previous employer, or other added years, in respect of transfer values brought in, must be allowed.
• Enhancements for disability/ill-health retirement should be allowed.

4. The sponsoring employer must be a contributor to the pension scheme.
5. In no circumstance, may a cash amount representing the employer's contribution, be paid to the employee.
6. In no circumstance, may any amount be paid by way of repayment of an employee's contributions to an employee who has more than 5 years' membership in a scheme. If an employee has more than 5 years' membership in the scheme then the accrued benefit entitlement must be preserved in the scheme and paid as a benefit on retirement or, alternatively, the value of the preserved benefits can be transferred to another registered scheme the employee is joining, or a registered Approved Retirement Scheme. This preservation requirement will only apply to years of membership, and contributions, after the effective date. Refunds of employees' contributions may therefore be made regardless of years of service, in respect of service and contributions up to the effective date.
7. The contributions made by an employee in a scheme year must not exceed 10% of the employee's remuneration in that year. For the self-employed, the contributions must not exceed 20% of earnings in the year.
8. Where members' contributions are required these must be deducted from earnings and be paid over to the Trustees/ Administrator within one week of the deduction date.
9. The ordinary annual contributions made by the employer to the scheme must not exceed 10% of remuneration. Deficiency payments are allowable but must be substantiated by an actuary.
10. The contributions to the fund by the employer and the employee shall be mutually recognized by both parties as a condition of employment. That is, membership in the scheme must be compulsory for the employee.
11. Pensions cannot be paid to employees who retire on a voluntary basis earlier than 10 years prior to the specified normal retirement age of the scheme, but no earlier than age 50.
12. Suitable winding-up provisions must be outlined (see also page 25).
13. Minimum solvency requirements must be met.
14. Pension rights cannot be assigned.
15. A member may allocate a portion of his/her pension in favor of a spouse or dependent.

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Information Requirements

So as to ensure full disclosure and accountability, provisions should be made for the submission to the regulatory authority and to the respective members of the schemes, of the following reports by each Pension Fund:

Information to the Pensions Commission

• Annual audited accounts and reports on the membership within nine (9) months after the end of the financial year. These should include full details of the assets.
• Actuarial valuations and Reports on solvency at least once in each three year period, within one-year after the due date.
• Custody of the assets should be satisfactory.
• Any other information as may be reasonably required from time to time by the regulatory authority.

1. When an employee retires he will rely on his pension scheme to provide financial support for the rest of his life. In view of the importance of pension benefits, it is essential that members of pension schemes are kept informed of the benefit entitlement on a regular basis. The appreciation for, and knowledge of, the promised level of benefits would be increased with more disclosure. Trustees of pension schemes should ensure that each active member receive as a minimum, within 6 months of the end of the scheme year, the following information:

(i) Information to be provided to a member of a defined benefit scheme:

1. Name
2. Date joined scheme
3. Date pensionable service commenced
4. Normal retirement date
5. Pensionable earnings for scheme year
6. Member's basic contributions for scheme year
7. Member's additional voluntary contributions for scheme year
8. Member's total basic contributions accumulated with interest to the end of the scheme year
9. Member's total voluntary contributions accumulated with interest to the end of the scheme year
10. Accrued pension (based on pensionable salary and service as defined in the scheme rules) at the end of the scheme year.

(ii) Information to be provided to a member of a defined contribution scheme:

1. Name
2. Date joined scheme
3. Normal retirement date
4. Basic contributions paid by member during scheme year
5. Member's additional voluntary contributions for scheme year
6. Member's total basic contributions accumulated with interest to the end of the scheme year
7. Member's total voluntary contributions accumulated with interest to the end of the scheme year
8. Employer's total contribution made on member's behalf accumulated with interest
9. Total bonus (if any) credited to member accumulated with interest to end of scheme year

2. The following information should also be made available for inspection on request:

1. A copy of the annual audited accounts of the scheme;
2. A schedule of the investments of the scheme giving a breakdown by market value into broad categories such as ordinary shares, property and fixed interest investments;
3. A copy of the latest triennial actuarial valuation report of the scheme;
4. A copy of the Trust Deeds and plan rules; and
5. Any changes to the Trust Deeds and Plan Rules must be communicated to the members.

3. Recourse to the Pensions Commission:

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Investment Criteria

1. At least 80% of the market value of the assets of the fund must be invested in Jamaica.
2. A pension fund shall not own more than 30% of the voting shares for any corporation.
3. No more than 10% of the market value of the pension fund may be invested in a single investment, or directly in the company or in any of its affiliated entities/subsidiaries.
4. For transactions not carried out in stock exchanges, no more than 5% of the market value of the pension fund may be invested in the affairs of its institutional investor and its related entities, provided all such transactions are carried out at market rates and are declared to the Pensions Commissioner.
5. Investment in real estate required for the occupancy or expansion of the business of the institutional investor is prohibited.
6. No more than 5% of the market value of a Pension Fund may be invested in the business of the sponsoring employer.
7. Omnibus Clause

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Ownership of Assets

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Trust Deed and Rules

• The appointment and removal of Trustees, inclusive of member-nominated Trustees;
• The contributions required by employers and by employees;
• The method of determining the benefits payable to members or to their beneficiaries, in the named contingencies, e.g. retirement, death, termination, etc.;
• The eligible categories of beneficiaries under the scheme;
• The investment powers of the Trustees; and
• The winding-up of the plan.

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Retirement Age

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Beneficiary Designation

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Plan Winding-Up

1. Current pensioners and beneficiaries.
2. Active members, deferred pensioners, and their beneficiaries.
3. The sponsoring employer/employers.

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Offences and Penalties

• cancel the registration of Trustees;
• require the sponsoring company to have new Trustees appointed, within the guidelines set by the Trust Deed;
• appoint a temporary manager to manage the fund's assets;
• fines to be applied to the Sponsoring Company and/or the Administrator and/or the Trustee(s) for breaches under the Act in their capacity, as deemed appropriate by Court Order; and
• imprisonment of the Director(s) of the Sponsoring Company and/or the Director(s) of the Administrator, and/or the Trustee(s) for breaches under the Act in their capacity, as deemed appropriate by Court Order.

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The Creation of an Independent Regulatory Body

The administration of the pensions regulations should be undertaken by an independent body, to be directed by a board called `The Commission'. The major function of this entity is to supervise the operation of pension funds, specifically with respect to legal, administrative and financial matters. In so doing, the Pensions Commission will have to interpret the relevant laws and regulations and provide general rules governing the trustees and managers of pension funds.

It has been recommended that the Pensions Commission should be comprised of a Chairman and six to eight members, drawn from the public and private sectors, appointed by the Minister of Finance and Planning.

The Pensions Commission shall appoint a Superintendent of Pensions and employ a small, specialized working staff, which fully utilizes the information available to it from auditors, actuaries and other sources. In order to facilitate this, provisions will be included in the legislation making it the duty of the auditors/actuaries to report to the Pensions Commission on transactions adversely affecting the fund and/or members' rights.

The Pensions Commission and its staff should be sufficiently funded, and will have as its main source of funds the registration fees payable by the pension schemes, administrators and institutional investors. Alternative methods of funding would be an annual renewal fee either per capita on the membership of each fund/scheme, or per percentage of each fund/scheme, or based on a combination of both.

The Pensions Commission will be required to present annual reports to Parliament, and the National Pensions Act will provide for transparency and accountability with respect to all of the Commission's activities.

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The Development of Provisions which Enable self-employed Persons and Persons in Non-Pensionable Employment to Effectively Provide for their Retirement

The Income Tax Act currently allows for Approved Retirement Schemes that are operated to provide pensions for self-employed persons, and employees who are not contributors to an approved superannuation fund. These schemes are however, unattractive and impracticable, as under the Income Tax Act, self-employed persons are subject to a ceiling on salary contribution towards pensions, of $6,000 per year. This level of contribution provides benefits that are insufficient to meaningfully supplement the benefits payable under the N.I.S.

It is therefore suggested that the first and most important step in enabling self-employed persons and those in non-pensionable employment to effectively provide for their retirement is to raise this ceiling. A cap of 20% of the chargeable income of the contributor, subject to a maximum is suggested. For example, $4,999,200 per annum ($416,600 per month/$96,140 per week).

The Approved Retirement Schemes will be governed by the same legislation as the occupational pension plans and as such, will have to satisfy similar registration requirements.

The following provisions will also be made:

• the total of all contributions paid in each calendar year to the individual plan and to any other registered retirement plan may not exceed the maximum allowable under a registered occupational plan. This makes the treatment of individual plans consistent with that for occupational plans.
• the member must contribute regularly (at least annually) to an Approved Retirement Scheme.
• the maximum lump sum on retirement or death for individual plans should also be consistent with the provisions for occupational plans.
• individual pension plans may be administered by any registered fiduciary institution acting as a trustee, operating under a master trust deed with many individual members.
• provisions should be made for the transfer of pension rights from an existing approved occupational plan into an individual retirement plan, without tax liability, upon the termination of the member from employment that is covered by an approved plan.

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The Development of Provisions for Parental Pensions

There is currently an express need for creating a vehicle to facilitate the provision of pensions by persons for their parent(s) who has/have no or inadequate pension entitlement. It is therefore necessary to widen the pensions system to allow savings by adults towards parental pensions.

In order to facilitate this, the following provisions will have to be made:

• The maximum annual contribution to such a scheme by any individual would be 5% of his/her salary.
• Similar to the Approved Retirement Schemes, the Parental Pension Plan must be administered by any registered fiduciary institution acting as a trustee, operating under a master trust deed with many individual members.
• The level of Parental Pensions must be such that when added to any other pension(s), the total is within the limit for self-employed persons.

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Preservation of Deferred Entitlement/Portability of Pension Rights

Although most employees have been a part of a pension plan at one point or another, several of them upon retiring do not have sufficient resources to sustain them through to the end of their lives. This is because persons on changing jobs tend to opt for contribution refunds, rather than deferred pensions. Therefore, funds which should be accumulating as saving for retirement, are frequently used for consumption purposes during the employee's working lifetime. This then forces persons to work longer than they would normally have to, or to depend on the state or their families for their livelihood.

It is therefore necessary to enact statutory provisions to ensure that pension rights are automatically transferred or preserved on changes of employment after the attainment of a stipulated minimum period of employment. More specifically, a number of options shall be made available to the contributor, as follows:

1. Upon the termination of the service of an employee in circumstances in which he is not entitled to a pension and in which the period of service as a member of the fund is less than five (5) years, the contributions paid by the employee may be refunded to him together with any interest earned thereon, as recommended by the actuary;
2. On termination of service on completion of more than 5 years' membership, the members' pension rights must be preserved in the plan, or be transferred to another occupational plan or approved retirement scheme he is joining, in accordance with his wishes; and
3. Notwithstanding (i) the employee may be offered the option to leave his contribution in the Fund and be eligible for a deferred pension.

Revaluation of Deferred Entitlement

Transitional Arrangements re: Preservation of Deferred Entitlement/Portability of Pension Rights

1. entitlement under the Income Tax (Termination of Employment) Order, 1971, will continue tax free; and
2. accumulated employees' contributions for all service prior to the commencement date may be returned on death/termination, tax-free.

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Indexation of Pensions

Under present legislation, a pensioner's annual pension at retirement and thereafter is limited to two-thirds (2/3rd) of the member's salary at retirement. This restricts the amount by which a person's pension can be increased after retirement, and in the long run results in erosion of the real value of the benefit received. In an inflationary environment, maintaining the purchasing power of the pensioner's benefit to some degree should be given due consideration. However, given the extra cost of providing a pension that is linked to inflation and the difficulties involved in finding suitable investments to cover the indexed liability, it is not felt to be appropriate to make indexation compulsory.

The indexation of pensions shall therefore be subject to affordability by the fund and/or the employer. When indexation is applied the following shall be applicable:

• after a minimum of 37 1/2 years employment with the plan sponsor, the total pension payable shall not exceed 75% of the member's highest salary earned by him during any twelve (12) consecutive months of membership of the plan. Post-retirement increases will be allowed even if this ceiling is breached, as long as such increases are granted to the incumbent pensioners in the plan as a class and any individual variations are based on a formula recommended by the actuary.
• the cost of increases shall be met out of the accrued surplus in the fund or out of special contributions by the employer, subject to approval by the Regulatory Authority and the Commissioner of Income Tax.
• the increased pension should not exceed the maximum pension mentioned above, increased by reference to the Consumer Price index (CPI) for the period between the date of retirement and the date of granting the increase.
• the increases should be recommended or have the written approval of an actuary.

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CREATION OF FUNDED SCHEMES FOR PUBLIC SERVANTS

There are various types of pension arrangements for Government workers, ranging from the non-contributory "Pay-As-You-Go" (PAYG) schemes, to the partially and fully funded pension plans. The majority of government workers are part of non-funded Pay-As-You-Go schemes, and are paid their pensions out of the Consolidated Fund.

There are many advantages and disadvantages of the current system. The good features include: the facility to be retired on permanent ill-health, subject to receipt of acceptable medical certification; retirement income for life, with facility of partial commutation of lifetime benefit for a single cash lump-sum; and favorable treatment of mixed service with the same employer but in different categories of work.

However, certain features of the current pension system are undesirable or cumbersome. These include: the fact that pensions are not a right, but are awarded by grace of the Governor General; the inordinate delay between the last salary cheque and first pension cheque; the inequitable variations in pension formulae for large groups like teachers and public officers (civil servants and nurses); and the fact that employees and the public do not understand the pension system.

The planned reforms seek to correct these problems, while at the same time ensuring that the favorable features that currently exist are not lost. In so doing, it is now desirable to rationalize the large number of schemes currently existing, and to take the opportunity to create funded schemes dedicated solely to the provision of pensions and related benefits to public servants.

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This will involve the following:

Improved Benefits

Associated with the creation of visible pension funds for public servants, are a number of benefits not previously enjoyed by government workers. These are outlined below:

Public servants will now be able to see exactly where their fortunes lie. They will be able to critically examine the investment and administration of the funds, and have an input as to how they are operated. Furthermore, with the planned enforcement of information requirements similar to those to be implemented in the private sector, public servants will be kept abreast of their entitlement and rights.

With the establishment of dedicated funds, the proper investment of these funds can produce surpluses, which can be used to increase pension benefits to be made to the retired public servants.

• Dedicated funds are sources for post-retirement indexation of pensions.
• Administrative improvements in the Ministry of Finance and Planning will be a feature of the planned reforms, and will ensure that the delays in calculating and making payment of pension benefits to public sector retirees and other beneficiaries are significantly reduced.
• In keeping with the principle of equity, and in seeking to ensure that public servants accumulate sufficient resources for their retirement, the preservation of deferred entitlement as applies to the occupational pension and superannuation schemes will be extended to the public servants' funded schemes.
• The Government will preserve the acquired rights under the Pay-As-You-Go Schemes in respect of service, up to the date of the change.

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Funding Arrangements

Also associated with the creation of funded schemes for public servants, are changes in the funding arrangements. Large categories of workers will move from being participants in non-contributory schemes to a situation wherein all public servants will contribute, by salary deductions, towards funding their pension.

There are important implicit and explicit benefits of this arrangement, as are outlined below:

• Requiring public servants to contribute toward their pension will automatically heighten their awareness of the need for preparing for retirement. They will now have a vested interest in ensuring that the funds are properly managed, and will probably be encouraged to make additional arrangements for their retirement; and
• Pension Funds will grow and will therefore be a source of greater investments and benefits.

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Transitional Arrangements re: The Creation of Funded Schemes for Public Servants

These reforms will be achieved on a phased basis, allowing previously employed staff the option of contributing, while all new employees will be required to contribute as a condition of employment in the Public Service.

During the period of transition and under the existing pension laws for the public sector, the Government should continue to provide and guarantee the accrued pensions payable to retired public servants.

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