Oran Hall | Pension payment certainty

The Tourism Workers Pension Scheme, TWPS, which is managed in accordance with the Tourism Workers Pension Act, 2019 and the Pensions (Superannuation Funds and Retirement Schemes) Act, 2004, like other registered private pension arrangements, was set up to provide retirement and other benefits for members upon normal, early or late retirement, ill health or disability, as well as to the beneficiaries of a member upon death.

Although the TWPS is funded by the contributions made by tourism operators on behalf of members of the scheme who are in their employ, the contributions of the members, transferred assets accepted by the trustees, interest, dividends and other investment income, it was seeded by a $1-billion endowment by the Government, and there is provision for the acceptance of donations paid into the scheme from time to time.

Like other approved retirement schemes, and pension funds, there are bodies and professionals – the Financial Services Commission, FSC, boards of trustees, investment managers administrators and actuaries – responsible for its proper running in accordance with the relevant laws.

The FSC is responsible for regulatory oversight of the scheme in accordance with the Pensions Act and the FSC Act. It has authority, among other things, to issue to the administrator, investment manager and trustees directions to be followed in how they perform their respective functions under the relevant laws.

It can also require them to provide written information relating to matters pertaining to their functions in relation to the scheme, and to investigate the activities of the scheme where it appears to the regulator that it does not meet the funding or solvency requirements prescribed by the FSC.

The board of trustees is vested with responsibility for the administration, investment management and control of the TWPS. The board is charged with prudently investing the assets of the scheme with financial institutions licensed by the FSC and to place deposits in deposit-taking institutions licensed under the Banking Services Act.

MANAGING PENSION SCHEME ASSETS

It is to manage the assets of the scheme consistent with the statement of investment policies and principles, or SIPP, manage and control all assets transferred into it, purchase or otherwise secure retirement benefits for members and other benefits to which their beneficiaries are entitled.

The board of trustees is also responsible for maintaining a retirement savings account in respect of each member of the scheme, and furnish each with a statement of the amount accruing to the credit of that member. It is also to safeguard all records of the TWPS for each member for seven years after its liability to that member, or the beneficiary of that member has been extinguished.

The board may delegate any of its functions to an authorised person, but it also has power to revoke the authorisation if, for example, a pension benefit is not paid, or is not paid within a reasonable time.

The investment manager is a company licensed under the Pensions Act to invest and manage the resources of the scheme, a function delegated by the trustees. It develops investment strategy for the scheme for the approval of the board, prudently invests and manages its assets consistent with the SIPP and in accordance with the approved investment strategy, and reports to the board on the performance of the investments of the retirement scheme.

RETIREMENT SAVINGS

The administrator is a financial institution which is licensed under the Pensions Act and is appointed by the board to administer the scheme. The administrator is required to establish a retirement savings account with a unique number for each member, credit the retirement savings account of each member with all contributions, and provide support services including access to account balances and statements.

The administrator also calculates the benefits to which each member is entitled as at the date that the benefits are accrued, ensures the payment of benefits in accordance with the Tourism Workers Pension Act, and is to ensure that all income earned from the investment of the scheme is distributed to the credit of the retirement savings account of the member.

The board is also required to appoint an actuary to manage the financial risks of the scheme by conducting an actuarial review of it at least once every three years to examine its financial position and its ability to meet its existing and contingent liabilities.

Ultimately, the TWPS and other retirement schemes and pension funds must be kept on a sound footing so that they can meet their obligations to their members and their beneficiaries.

Oran A. Hall, author of Understanding Investments and principal author of The Handbook of Personal Financial Planning, offers personal financial planning advice and counsel. finviser.jm@gmail.com