As Governments face funding challenges, how important are private pension plans to the society?
Barbados had pension reform starting back in 2003 which had all the usual suspects in terms of why we need pension reform. So we had persons ageing, we had persons working in the era where they were going to be retiring all very close behind one another and we were seeing challenges coming in our future.
So the National Insurance Scheme (NIS) went through reform, like many of the other National Insurance schemes in the Caribbean, and we looked at contribution rates to the NIS, we looked at the working age and we looked at the informal sector as well and tried to get the informal sector to make more contributions to the NIS.
So that reform has been ongoing, as we have had reform ongoing throughout the Caribbean. But in Barbados, once we got the National Insurance reform going, we then looked at the private pensions sector and the occupational pensions sector specifically, and the Occupational Pensions Benefits Act (OPBA) and its regulations came into being on February 1, 2011.
In terms of regulatory reform, this was a very ambitious piece of legislation. It sought to capture not only registration of occupational pension plans, but also the regulation of plan administrators, trustees, and reporting data of the amendments to the pension plan legislation. So whereas it was a very advanced piece of legislation compared with other legislation related to pensions, the OPBA also had a gestation period that was going to take some time for the industry to get accustomed to.
The accountants had to get accustomed to it, the plan administrators, and the insurance providers, and you were coming from a background where the regulation of the occupational pensions was dealt by the Inland Revenue Department and they had a different type of overview, which spoke to the revenue side of it.
It created some challenges in terms of the administration of the act and in terms of the registration process and created some major changes for a lot of the stakeholders.
Under the new legislation, the plan administrator was the key stakeholder with the responsibility for a lot of the regulatory submissions. The plan administrator also took on the responsibility for a lot of the penalties under the legislation.
So we as the regulator put on some educational programmes to get people to understand this because of the material impact that this would have had in terms of the operations of the plan administrator.
The legislation also provided for agents of the plan administrator to source actuarial support and administrative support. The agents of the plan administrator were also held responsible, as the plan administrator would be under the legislation.
We obviously as regulators have been working to provide support to see how we can get the record keeping of the pension plans up to a particular level, to supply the actuaries with the information as needed. Three years in, we recognise that there are material benefits to having a properly regulated and properly functioning system, but we now have to look at the legislation itself, the various aspects that may need to be reviewed and revised to support growth in the sector. That is the point we are at now with the pension legislation.
Certainly we are comfortable that we have a better understanding and grasp of how the sector is operating.
Randy Graham is chief executive officer of the Financial Services Commission.
