Investment Criteria

The investment of funds by the managers/institutional investors, shall be subject to limits according to the generic type of the instrument, limits per issuer, and limits per category and risk level.

The following are some of the limitations to be enforced by the FSC:

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 FSC.
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

As an important safeguard, it will also be explicitly stated that the assets acquired for the pension fund must be registered, issued or transferred on behalf of the respective pension fund. In addition, the trustees\the institutional investors must at all times be able to prove that they have the relevant securities and titles.

Trust Deed and Rules

Existing Plans

33. Any application for the registration of a Pension Fund already in existence, must be accompanied by a letter from the Income Tax Department approving the scheme, and a copy of the Trust Deed and Plan Rules, which must include, inter alia, satisfactory clauses providing for:

• 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.

New Plans

Any application for the registration of a new pension fund must be accompanied by a draft copy of the Trust Deed and Plan Rules, which must include satisfactory clauses providing for the above factors.

(a) Normal Retirement Age

The law will require every registered plan to have a specified normal retirement age in the Trust Deed and Rules. The minimum normal retirement age which would commonly be allowed is 60. However, individual pension plans may specify a different retirement age for the members as may be desirable in accordance with the nature of occupation involved.

(b) Early Retirement

Early retirement will be allowed no earlier than 10 years before the normal retirement age except on ill-health grounds.

(c) Late Retirement

Late retirement will also be allowed.

In the event of death before retirement on pension, the rights of contributors and beneficiaries will be protected so that they accrue to the fullest extent to dependents or the named beneficiaries.

In all cases of plan winding-up (whether voluntary or otherwise) the specific approval of the Regulatory Authority will be a condition precedent to the winding-up. The Trustees should submit winding-up proposals to the FSC for approval.

In some instances there may be residual surpluses after completing the process of winding-up of any fund/scheme, final distribution of the remaining surplus/residual assets will be allocated in the following order of priorities:

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

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May 2001

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