2. • The views expressed in this presentation are those of the Author and
do not necessarily represent the views of the Financial Services
Commission, its Board of Commissioners, its officers or staff.
• In relation to Phase II, the policy proposals are the result of detailed
consultation and are subject to the consideration of Parliament
Disclaimer
3. • As at March 31, 2015
• AUM - $350 Billion
• 102,222 persons in private
pension plan
• 13 retirement schemes
• Reduction in number of funds to
410
Macro-economic context – Private Pensions
As at March 31, 2015
• Increase in ARS membership of
approximately 40,000
• 28% increase in ARS
membership
• Coverage increased to 9.4% of
labour force
4. • As at December 31, 2014
• AUM – 14.36% of financial
industry
• AUM – 24% of GDP
Macro-economic context – Private Pensions
Long-term goals of FSC
Increasing pension coverage
Promoting retirement schemes
Enhancing risk-based supervision
Safeguarding pension assets
Improving enforcement and
resolution powers
5. • Third Pillar of a sound Retirement System
• Distinct from NIS
• Voluntary retirement saving arrangements
• Accumulation phase (saving monies for retirement income)
• Established by employers voluntarily (superannuation funds)
• Or established by life insurance companies or securities dealers
(retirement schemes)
• Retirement schemes are a retail retirement product – open to public
Private Pension Plans
6. • In mandatory pension systems – automatic enrollment, mandatory
participation
• In voluntary pension systems – creation of arrangements driven by:
macro-economic conditions
potential business revenue
regulation
preferential tax treatment
behavioural norms
current labour market conditions (trade unions)
Private Pension Plans
7. • In Jamaican context:
Incentives for private pension plans – favourable tax treatment (EET)
Incentive for employers creating superannuation funds – retention of
talented labour
Incentive for employees – deferred pay (ASF), future income security
Private Pension Plans
8. • For retirement schemes – challenges include:
Poverty
Lack of financial awareness among labour force
high degree of informality
cultural norms – dependence on children, remittances
reluctance to engage with financial sector
Private Pension Plans
9. • Financial Services Commission Act
• Financial Services Commission Act (Pensions) Order
• Pensions (Superannuation Funds and Retirement Schemes) Act
and Regulations
• Financial Services (Amendment to the Fourth Schedule)
Order
• Case Law
Source of FSC’s regulatory powers for Private
Pension Plans
10. • Encouraging growth of private pension plans
• Fostering increased pension coverage
• Better managed plans, which are solvent
• Better informed participants
• Greater transparency in pension plan management
• Accountability of trustees, investment managers and administrators
• Identification of high risk plans
Purpose of Regulation
11. • Registering existing pension plans and new plans – section 5
• Regulating of trustees, corporate service providers (investment
managers, administrators)
• Approving amendments – “best interest of the plan”
• Enforcing compliance with reporting requirements
• Funding and Solvency of Pension Plans
Focal Points of the legislation
13. • Desk based examination
• On-site examination
• Target examinations
• High risk pension plans
• Heightened monitoring
• Timely enforcement action
Risk based supervision
14. • Certified Financial Returns
• Annual Report
• Actuarial Valuation – imposed by TAJ, usually triennially
• SIPP – statement of investment principles and policies
• Constitutive documents
• Fit and Proper documents for Trustees, Corporate Service Providers
Statutory filings
15. • Benefit statements
• Members’ handbook
• Information folder – retirement schemes
• Proposed amendments to the constitutive documents
• Material changes – Governance Regulation 13
• Annual report, policy documents
• Constitutive documents
• Annual Participants’ meeting
Disclosure to Members
16. • Trustees’ fiduciary duty
• Monitoring of contributions by Trustees
• Supervision of agents by Trustees
• Creation of written policies
• Complaints Resolution
• Conflict of Interests
• Disclosure of fees
Governance – Consumer Protection
17. • Governance Regulation 27:
• Prohibits false or misleading statements about contributions,
benefits, conditions or terms of the scheme
• Prohibits false, misleading, deceptive or untrue course of action
• Prevents market manipulation (unreasonable restraint or monopoly)
• Prohibits, false, misleading or deceptive forecasts in order to induce
membership
• Prohibits dishonest concealment of material facts
• Prohibits making reckless statements, promises or projections
Market conduct of retirement schemes
18. • Prohibits any rebate of contributions as inducement for membership
• Prohibits false record keeping
• Prohibits termination or refusal of membership on the basis of mental
or physical impairment
• Prohibits inaccurate categorisation of professional services
Market conduct of retirement schemes
19. • Fit and Proper review of trustees, investment managers and
administrators
• Directions
• Cease and Desist Orders
• Fixed Penalties
• Suspension and/or Cancellation of Registration/Licences
• Criminal offences for sponsors, investment managers and
administrators
• Winding up of the pension plan – nuclear option
Enforcement
20. • Directions – section 4
• Section 4 expanded to include sponsors, investment managers,
administrators of unapproved funds
• Section 17 - suspension of an Investment Manager/Administrator or
trustee
• Section 18 – cancellation of an Investment Manager/Administrator;
Trustee
• Due Process – FSC to inform of proposed suspension/cancellation and
right of appeal under section 39
Directions, Suspension/Cancellation
21. • Funding & Solvency
• Failure to provide information requested by FSC
• Operations of a fund or scheme
• Activities of the administrator, investment manager, trustee, sponsor
• If breach of legislation is discovered, costs of investigation can be
recovered
Specific Investigation Powers – section 23
22. • Section 26
• Directions can be issued in relation to the business of fund or scheme
• Directions can be issued to administrator, investment manager,
sponsor or trustee
• Directions remain in place for 12 months
• Further directions can be issued
Specific Power to issue directions after
Investigation
23. • Financial Services Commission Act, section 8
• Financial Services Commission (Pensions) Order
• Prescribed financial institutions – investment managers,
administrators, corporate trustees
• Tied to the Third Schedule, Part A – engaging in an unsafe and
unsound practice
Cease & Desist Order, Temporary management
24. • Financial Services Commission (Amendment to Fourth Schedule)
Order, 2014
• Fixed Penalties range from $50,000 to $200,000
• Relates to breaches of offences
• Not applicable to Trustees (as they are not subject to criminal
sanctions)
• Impacts sponsors, investment managers, administrators
• Alternative to criminal prosecution – Lowell Lawrence v FSC
Fixed Penalty for breaches
25. • Failure to give information to members
• Failure to file statutory returns at prescribed deadlines
• Failure/refusal to give information to FSC as requested
• Sponsoring a fund or scheme without being registered
• Operating as an investment manager or administrator without being
licensed
• Failure to keep proper records as an administrator or investment
manager
Fixed Penalty for breaches
26. • Knowingly filing incorrect returns
• Sponsor’s failing to pay over contributions to investment manager
• Obstructing a search or seizure of property
• Applies to failure to display a certificate of registration
Fixed Penalty for breaches
27. • Adequacy Phase
• Vesting – maximum 5 years from Amendment Act
• Funding & Solvency
• Portability of pension benefits
• Regulation of surplus distribution in an ongoing fund
• Simplification of amendment process
• Permitting multiple membership in retirement schemes and funds
Phase II – Key Proposals to safeguard assets
28. • Partial winding up
• Enhanced investigative powers
• Enhanced enforcement powers
• Registration of sales representatives for retirement schemes
• Financial hardship payments from retirement schemes
• Regulation of advertisements
Phase II
30. • Retirement planning – school curriculum (primary, high schools)
• Targeted financial inclusion campaigns – universities, work-places,
churches
• Use of mobile apps, social media, games, cartoons
• Education of sponsors
• Agents – answerable to Trustees, not sponsor
Financial Education - Important Needs
31. • Need to educate young persons about the importance of retirement
planning
• Changing cultural norms and family structures – affect content of
message
• Content creation and delivery of message needs public-private
partnerships
• Creative methods of delivery message to target audiences
• Social media, Mobile apps, cartoons
• Traditional methods of delivery – print media, radio, television
Need for Financial Awareness
32. • Macro economic conditions require sound retirement planning
strategies
• Behavioural Economics
• Cost of superannuation funds prohibitive for MSMEs – retirement
schemes the solution
• Need for growth in retail retirement savings products
• Retirement schemes – avenue for financial inclusion
• Retirement schemes – open to self-employed persons, employees
who are not in ASF
• Phase II seeks to promote retirement schemes
Need for Retirement Planning
33. • For further information, please
contact the FSC at:
• 39 – 43 Barbados Avenue,
Kingston 5, St. Andrew, Jamaica
• Email:
williamsmk@fscjamaica.org
Thank You!!!
