The Tribune

By NATARIO McKENZIE

Tribune Business Reporter

nmckenzie@tribunemedia.net

OCCUPATIONAL pension fund assets in the Bahamas dropped by 38.6 per cent between 2007 and 2011 due to the recession, a Cabinet Minister said yesterday, adding that the Government’s proposed pension legislation represented a “major step forward” for regulation.

During his House of Assembly presentation on the Employees Pension Fund Protection Bill, Michael Halkitis, minister of state for finace, said the value of occupational pension fund assets in the Bahamas dropped from $1.1 billion in 2007 to around $675 million in 2011.

“In 2007, the assets managed by occupational pension funds were just over $1.1 billion Bahamian dollars,” said Mr Halkitis. “The amount of assets had been experiencing double digit growth up to that point.

“Unfortunately, with the onset of the financial crisis, you see that by 2011 the assets managed by occupational pension funds was in the region of $675 million. That was a result of persons who had become unemployed having their benefits withdrawn from the pension funds. thereby receiving their funds.”

Speaking on the proposed legislation, which was tabled in July 2011 and draws upon much of the work performed by a Pensions Task Force appointed under the Ingraham administration, Mr Halkitis said there currently was no regulation of private, occupational pensions in the Bahamas.

The Bill, he said, would provide the sector with a legislative framework, and reassure members of private pension plans that the management and investment of their funds must operate within specific guidelines.

Mr Halkitis added that the Bill prohibits the operation of a pension plan or fund without registration, and sets out the general responsibilities its manager. It also imposes a duty upon the employer to give information to an administrator.

The Minister said the legislation would ensure that upon retirement there would be funds in a worker’s retirement account to enable them to sustain their standard of living and quality of life.

The Bill will also create a publicly funded Pension Commission to regulate the sector. Addressing concerns over more government bureaucracy, and additional costs associated with establishing this new regulator, Mr Halkitis said: “The Government is of the view that the function of the Pension Commission can be undertaken using the resources of the existing regulatory commissions, most likely the Securities Commission or the Insurance Commission, so that they are not setting up entirely new infrastructure.”

While acknowledging concerns over the dismal 25 per cent pension workforce coverage ratio in The Bahamas, and lack of mandatory pensions, Mr Halkitis said this should not stop the Government from seeking to regulate the sector.

“The information we have is that approximately 25 per cent of individuals employed in the private sector have, or are members of, a pension plan. The concern has been raised that because it is so low, and now we seek to regulate it, that it may discourage employers from establishing a plan. We do not believe that is the case. In any event that should not preclude us from seeking to regulate an industry that is so important by virtue of the amount of funds in private pension funds, and the potential for the funds,” said Mr Halkitis.

“I look forward to one day when all of the persons who work in the private sector can have the benefit of a pension fund and, perhaps one day, Parliament would consider making pensions mandatory for all persons working in the private sector. This Act does not do this today, but is seeking to protect individuals who have pension benefits as a result of their contract of employment.”

Mr Halkitis called the legislation “timely” and “necessary”.