On Tuesday, July 23, 2019, Minister of Finance and the Public Service Dr Nigel Clarke moved amendments to the Pensions (Superannuation Funds & Retirement Schemes) (Investment) (Amendment) Regulations 2019, which were passed by the House of Representatives.

These amendments will broaden the range of permissible assets in which pension plans can invest, and strengthen the legislative framework with respect to safeguarding the assets of pension plans.

Giving his rationale for the change, Clarke observed “Mr Speaker, as we move into a new regime that’s underpinned and anchored by macroeconomic stability, where the Government’s appetite for debt is reduced and where pension funds have funds they need to invest, it is necessary to broaden the range of assets that pension funds can invest in. Furthermore, 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.”

Upon passage in the Senate, pension plans will now be permitted to invest in the following additional assets;

• Bonds (such as unsecured debt) issued by companies that have an investment grade rating from a recognised rating agency. Early clarity on what an investment-grade rating means will be welcome, on the assumption that for Jamaican entities issuing Jamaican-dollar debt at least, the Government will be treated as investment-grade by at least one regional rating agency, and certain large local corporates and State-owned enterprises would hope to be regarded as on par — and not capped by our country rating as determined by the international rating agencies, from accessing pension fund money.

• Bonds (such as unsecured debt) issued by companies listed on the Jamaica Stock Exchange. These companies are subject to mandatory accounting, disclosure, and governance standards, and the amendment corrects a gross and long-standing anomaly where pension plans could invest in equities of these listed companies, which are junior securities, but not unsecured debt issued by the same companies even though these have a senior claim on the assets of the company compared to the company’s equity securities. Amen.

Very importantly, a fund will now also be able to invest in the equity or debt of private companies, 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.

http://www.jamaicaobserver.com/sunday-finance/imminent-pension-plan-reforms-will-allow-them-to-invest-in-a-wider-range-of-assets_170957