Automatic pension enrolment will save retirees in Jamaica
85 per cent of UK workers now pensionable vs 18 per cent in Jamaica
With about 18 per cent of Jamaica’s working population having a pension plan, the retirement crisis persists and this situation should be of grave concern to the Government and all taxpayers.
Jamaica has an ageing population which is increasingly at risk of pension poverty, ie inadequate retirement income.
As such, I am recommending the automatic or mandatory enrolment of eligible employees in a workplace pension plan. This would allow more workers to make contributions for their retirement. The automatic enrolment programme would be a government-led initiative. The law, under such a programme, would require all employers to automatically enrol employees in a pension plan. It dictates that employees who didn’t contribute to a pension plan must be auto-enrolled by their employers in a workplace pension plan. Employees have the option to opt out of the pension plan after the mandatory enrolment. This automatic enrolment programme does not exist in Jamaica but has proven to be successful globally.
Locally, a lobby group, the Pension Industry Association of Jamaica (PIAJ) has appealed to the Jamaican Government to introduce this programme to the Jamaican workforce in response to the growing retirement crisis. The PIAJ had consulted with various stakeholders such as the Private Sector Organization of Jamaica and the Jamaica Confederation of Trade Unions for consensus.
A report from the UK Department for Work and Pensions showed that in 1901 there were 10 workers for every pensioner in the UK. By 2010 there were three working persons for each pensioner. By 2050 it is anticipated that there will be two workers for every pensioner. The United Kingdom is in this position after it successfully implemented automatic enrolment. This programme was introduced to the UK in 2012 due to the significant number of the working population who weren’t saving for retirement.
Employers enrolled all employees aged 22 and over who are working in the UK and earning over 10,000 pounds per year. Both employee and employer must contribute to the pension plan. The current minimum contribution is eight per cent (where the employer contributes three per cent and the employee five per cent). Employees can decide to leave the plan after 30 days of enrolment and their contributions refunded. Workers who opt out can rejoin the scheme at a later date. Those who opt out would lose the employer’s contribution. Funds are invested in a defined contribution scheme. Upon retirement, the amount available for pension income is dependent on how much the employees contributed and the performance of the funds. In addition, employees can access a percentage of their pension tax-free and receive the remainder on a monthly basis.
A survey done by market research company IPSOS Group SA revealed that 85 per cent of employees in the small and micro sectors remained in auto-enrolled pension funds and 71 per cent of employers believed that the automatic enrolment policy was beneficial to employees.
Source: Jamaica Observer