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Contributory pension scheme for government workers progressing
Avia Collinder, Business Writer The Government is exploring the range of available options that would lead to its 40,000-plus full-time state-paid workers footing at least part of the hefty J$9-billion bill the Treasury now pays for employee pensions.
The policy is being guided by the World Bank.
The Financial Regulations Division of the Ministry of Finance and Planning has been tasked with coordinating efforts to create the contributory pension scheme, which will replace the ad hoc widows' and orphans' benefit that passes for retirement benefits.
The current arrangement covers some 28,524 pensioners, inclusive of widows and orphans - 27,767 of whom are in Jamaica, while 757 reside overseas, according to the ministry's superannuation unit.
Otherwise, government pensioners have only their National Insurance Scheme contribution to rely on in retirement.
The unit is said to be now gathering data and preparing a Green Paper, which is generally a non-binding document, but which would outline the proposal and form the basis of discussions leading towards a more technical paper.
The World Bank is developing a contributory pension model for Jamaica from the data provided by the Financial Regulations Division, and is also offering technical assistance and training for the project.
The ministry is attempting a proper count of its civil-service corps - which different estimates at different times have placed loosely between 38,000 and 60,000 - to better inform the model being devised by World Bank consultants.
The move to introduce a scheme to which government employees contribute was accelerated this year in keeping with the decla-ration by the Government that the current pension arrangement, under which workers pay nothing, is unsustainable.
Director of the ministry's Financial Regulation Division, Bridgett Wilks, told the Financial Gleaner that the pension plan being developed is not to be confused with the existing workers' benefit contribution - originally called widows' and orphans' benefit - to which government workers contribute four per cent of their annual salary.
This benefit is paid to relatives of a state employee in the event of the worker's death and is governed by the Pensions (Civil Service Family Benefit) Act of 1978.
Pensions payments for varying categories of government workers now run to about J$9 billion yearly, with a J$500 million increase tacked on to the budget in 2010.
Government's pension payments in the 2008-09 financial year was J$8.5 billion.
In the civil service, the pensions are calculated based on salary earned at the date of retirement and the number of years worked while permanently employed.
An employee, to be eligible, has to have been in a pensionable post to which he or she had been permanently appointed for a minimum of 10 years.
Anywhere between 40,000 and 60,000 persons are believed to be on the Government's full-time payroll and the data-mining exercise now under way should determine the precise number eligible for any pension scheme decided on.
In April 2010, a finance ministry report put the number of government pensioners at 25,000. Now, it is newly estimated at 28,524.
The data-gathering process is also said to be accompanied by an analysis of existing pension legislation. At present, various sections of the civil service are governed by different laws, which will be harmonised as part of the exercise.
"The provisions in a lot of areas are similar, but [in others] they are different," Wilks said.
A new pension scheme which dips into the pocket of state employees will not entirely let the Government off the hook financially, since the state, as employer, will be expected to match employees' contribution to the pension fund. For superannu-ation schemes, the law mandates a five per cent employee contribution that is matched five per cent by the employer.
"The liabilities are going to be very large," Wilks said.
As such, the World Bank analysis is also looking at the implications of a pension scheme on central government debt.
Public-sector workers retire at age 65 - female retirement is currently being phased from 62 to equalise at 65 with males - but there is consideration on extending pensionable age.
Wilks said such a move would have its own costs, as the older worker would have more years of service and higher contributions, which would translate to a greater cost to the pension provider.
The move to revise pension arrangements has been on the cards since 2005, when the pension review was slated to be accompanied by the transfer of the Public Service Establishment Division, which currently has administrative responsibility for pensions, to the Cabinet Office.
At the time, the rationale for proposed changes, which were never implemented, was based on the same view the Government now holds of state pension obligations, in their current form, being unsustainable.
austanny@yahoo.com
http://jamaica-gleaner.com/gleaner/2...business5.html
Avia Collinder, Business Writer The Government is exploring the range of available options that would lead to its 40,000-plus full-time state-paid workers footing at least part of the hefty J$9-billion bill the Treasury now pays for employee pensions.
The policy is being guided by the World Bank.
The Financial Regulations Division of the Ministry of Finance and Planning has been tasked with coordinating efforts to create the contributory pension scheme, which will replace the ad hoc widows' and orphans' benefit that passes for retirement benefits.
The current arrangement covers some 28,524 pensioners, inclusive of widows and orphans - 27,767 of whom are in Jamaica, while 757 reside overseas, according to the ministry's superannuation unit.
Otherwise, government pensioners have only their National Insurance Scheme contribution to rely on in retirement.
The unit is said to be now gathering data and preparing a Green Paper, which is generally a non-binding document, but which would outline the proposal and form the basis of discussions leading towards a more technical paper.
The World Bank is developing a contributory pension model for Jamaica from the data provided by the Financial Regulations Division, and is also offering technical assistance and training for the project.
The ministry is attempting a proper count of its civil-service corps - which different estimates at different times have placed loosely between 38,000 and 60,000 - to better inform the model being devised by World Bank consultants.
The move to introduce a scheme to which government employees contribute was accelerated this year in keeping with the decla-ration by the Government that the current pension arrangement, under which workers pay nothing, is unsustainable.
Director of the ministry's Financial Regulation Division, Bridgett Wilks, told the Financial Gleaner that the pension plan being developed is not to be confused with the existing workers' benefit contribution - originally called widows' and orphans' benefit - to which government workers contribute four per cent of their annual salary.
This benefit is paid to relatives of a state employee in the event of the worker's death and is governed by the Pensions (Civil Service Family Benefit) Act of 1978.
Pensions payments for varying categories of government workers now run to about J$9 billion yearly, with a J$500 million increase tacked on to the budget in 2010.
Government's pension payments in the 2008-09 financial year was J$8.5 billion.
In the civil service, the pensions are calculated based on salary earned at the date of retirement and the number of years worked while permanently employed.
An employee, to be eligible, has to have been in a pensionable post to which he or she had been permanently appointed for a minimum of 10 years.
Anywhere between 40,000 and 60,000 persons are believed to be on the Government's full-time payroll and the data-mining exercise now under way should determine the precise number eligible for any pension scheme decided on.
In April 2010, a finance ministry report put the number of government pensioners at 25,000. Now, it is newly estimated at 28,524.
The data-gathering process is also said to be accompanied by an analysis of existing pension legislation. At present, various sections of the civil service are governed by different laws, which will be harmonised as part of the exercise.
"The provisions in a lot of areas are similar, but [in others] they are different," Wilks said.
A new pension scheme which dips into the pocket of state employees will not entirely let the Government off the hook financially, since the state, as employer, will be expected to match employees' contribution to the pension fund. For superannu-ation schemes, the law mandates a five per cent employee contribution that is matched five per cent by the employer.
"The liabilities are going to be very large," Wilks said.
As such, the World Bank analysis is also looking at the implications of a pension scheme on central government debt.
Public-sector workers retire at age 65 - female retirement is currently being phased from 62 to equalise at 65 with males - but there is consideration on extending pensionable age.
Wilks said such a move would have its own costs, as the older worker would have more years of service and higher contributions, which would translate to a greater cost to the pension provider.
The move to revise pension arrangements has been on the cards since 2005, when the pension review was slated to be accompanied by the transfer of the Public Service Establishment Division, which currently has administrative responsibility for pensions, to the Cabinet Office.
At the time, the rationale for proposed changes, which were never implemented, was based on the same view the Government now holds of state pension obligations, in their current form, being unsustainable.
austanny@yahoo.com
http://jamaica-gleaner.com/gleaner/2...business5.html