Pension reform debate underway in Jamaican senate

Jamaica's senate has taken up debate on key reforms to the public sector pension system, including introducing required contributions from public sector employees as the sector moves from a defined-benefit system to one based on defined contributions.

The switchover is central to the package, which arrives in the senate after approval from the lower house earlier this year.

"The reform of the public sector pension system was borne out of the recognition that the current system has become fiscally unsustainable thus rendering it unaffordable," read a white paper on the reform published by Jamaica's ministry of finance and planning.

Introducing the initiative, Senator Ruel Reid, the initiative's sponsor, said the changeover to a defined-contribution system relieves the government of being the sole contributor to public workers' pensions.

The two bills under consideration "make the pension system more affordable and sustainable for the government, while providing adequate benefits for pensioners," Reid, who sponsored the legislation, was reported as saying by the state-run Jamaica Information Service.

Reid added that, the government is set to spend more than 30bn Jamaican dollars (US$230mn) on the pension system in 2017, an outlay that is expected to rise in the coming years. In 2010, the pension expenditure was only 17bn Jamaican dollars, noted Reid.

"The current public sector pension arrangement is unsustainable, as only a small portion of public sector workers make contributions. These contributions are not related to their pension benefit. Consequently, this has serious implications for our public debt," he added.

"It should be noted that the intention of the reform is not a panacea, but the intention is to review the reformed system after a specified period, with the aim to determine if and what other reforms are required," he said.

Senator Don Wehby suggested that legislators also need to address portability of pension plans, according to local daily The Gleaner.

Wehby said the current system "is a disincentive for persons who wish to move into the private sector," adding that incentives need to be provided so " someone leaving the public sector would be able to transfer their accumulated benefits to a private sector pension scheme."