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Jamaican Government Proposes Changes to Pension Funds Investment Regime

26 July 2019

The government of Jamaica announced that pension plans will now be permitted to invest in private equity and venture capital for the first time. In aggregate, these amounts should not exceed a maximum of 5% of the assets of the pension fund.

(Loop) Finance Minister Dr Nigel Clarke on Tuesday, moved amendments to the Pensions Superannuation Funds & Retirement Schemes) Regulations that will broaden the range of permissible assets in which pension plans can invest.
Funds deposited in a superannuation account will grow typically without any tax implications until retirement or withdrawals.

Upon passage in the Senate, pension plans will now be permitted to invest in bonds issued by companies that have an investment-grade rating from a recognised rating agency; bonds issued by companies listed on the Jamaica Stock Exchange and certain equity or debt of private companies.

The equity or debt should be established under the laws of Jamaica, provided that in aggregate these amounts do not exceed a maximum of five per cent of the assets of the pension fund. This will allow pension funds to invest in private equity and venture capital for the first time.

“These amendments will provide higher return investment opportunities for pension funds while improving access to finance, deepening capital markets and providing options for financing outside of the banking sector,” Clarke told the House.

The amendment to the regulations strengthens the regulatory framework and requires each pension plan to develop an investment policy and mandates investment managers to invest pension fund assets in a manner consistent with the individual plan’s investment policy, the governing legislation and the regulations.

The amendments also revise investment concentration limits and increase the amount that pension funds can invest in secured leases.

“In this new era of low, stable and predictable inflation pension plans will need to be able to invest in higher returning longer-term assets to be in a position to fund their pension liabilities. These amendments will allow for this,” Clarke also said.

The Pensions (Superannuation Funds & Retirement Schemes) (Investment) (Amendment) Regulations, 2019 are to be approved in the Senate at the next opportune sitting.