THE PENSIONS (SUPERANNUATION FUNDS AND RETIREMENT SCHEMES) ACT, 2004

1
THE PENSIONS (SUPERANNUATION FUNDS AND RETIREMENT
SCHEMES) ACT, 2004
2
Objects

• To provide overall reform of the pensions
  system
• Make provision for the management of
  superannuation funds and approved retirement
  schemes and for matters connected therewith and
  incidental thereto

3
Scope

• Special provisions are made for specified funds
  of schemes those established by law
• It is illegal to operate a superannuation fund
  (SF) and retirement scheme (RS) unless same
  is registered with Financial Services Commission
  (FSC).
• All trustees must be registered.
• All administrators and investment managers (IM)
  must be licensed.

4
Licensing and Registration

• Trustees of all non-specified pension schemes
  must designate an administrator and IM within 14
  days after termination of employment or
  resignation of previous administrator or IM as
  case may be.
• Trustee must notify FSC of designation of
  administrator and IM within 14 days of
  designation.
• Only companies having the power through its
  Memorandum of Association or Articles of
  Incorporation may be licensed as administrators
  and IMs.

5
Licensing and Registrationcontd

• Administrators and IMs may only be licensed if
• all the members of its Board
• its manager, assistant manager, accountant and
  company secretary or the person(s) who carries
  out the duties of such persons and
• its designated responsible officer
• meet the fit an proper criteria set out in
  Act.
• In practice most schemes will probably use the
  same company to act as both administrator and IM.

6
Fit and Proper Criteria

• No convictions of any offence involving
  dishonesty whether in Jamaica or elsewhere
• Not an undischarged bankrupt whether in Jamaica
  or elsewhere
• Employment record does not indicate that person
  has carried out any act involving impropriety in
  the handling of monies
• Must be of sound probity, able to exercise
  competence, diligence and sound judgment
• Must have knowledge and experience in the
  business of SFs and RSs and
• Not incapacitated by reason of mental disability.

7
Licensing of Investment Managers

• In addition to the foregoing fit and proper
  criteria, an IM may only be licensed if
• it adheres to standards of sound business and
  financial practices in its operations
• its affairs are managed by qualified and capable
  persons
• persons employed by the applicant to deal with
  SFs and RSs are qualified and experienced in the
  management of or investment of assets of such
  funds or schemes
• it meets prescribed capital base and
• it is licensed dealer under Securities Act.

8
Licensing of Investment Managerscontd

• Same company may be designated as administrator
  and IM provided they are licensed in both
  capacities.

9
Registration of Trustees

• FSC must register as a trustee in the case of a
  company, an applicant which meets all the fit and
  proper criteria.
• In the case of an applicant who is an individual,
  all the fit and proper requirements must be met
  save for the requirement that the applicant must
  have knowledge and experience in the business of
  superannuation funds and retirement schemes.

10
Responsible Officer

• Every administrator, IM and corporate trustee
  must appoint a responsible officer (RO) within
  their company.
• RO must then within thirty days apply to FSC to
  be registered as RO.
• RO must do everything required
• in the case of an administrator, for the general
  administration of the scheme including the
  keeping of records and accounts
• in the case of an IM, for the management of the
  funds of the scheme in accordance with the Act
  and regulations including ensuring that
  prescribed asset investment ratios are met and
  reporting to the FSC on compliance.

11
Responsible Officercontd

• Failure to appoint RO offence and where no RO
  is registered FSC has duty to register as RO the
  MD or where there is no MD, the person in Jamaica
  who carries out functions of MD and if no such
  person then person appearing to the FSC to be
  primarily in charge of the companys affairs.

12
Time for Appointing RO

• Act does not give time period for appointing RO
  whether initially or after the termination of
  employment or resignation of a RO.
• Presumption therefore is that it must be done
  immediately.

13
Appointment of Actuary and Auditor

• The following are among the classes of persons
  who are defined as related parties and therefore
  cannot be appointed as an Actuary for a scheme
  without FSC approval
• administrator, IM, trustee or any of their
  directors, officers or employees
• member
• a person, or the spouse or child of a person, who
  is an affiliate of an administrator, IM, or
  sponsor or an employee, officer or director of
  such affiliate.
• Employee is defined to mean a permanent,
  part-time or contract worker.

14
Appointment of Actuary and Auditorcontd

• Trustees shall notify FSC of appointment of
  Actuary or Auditor within 14 days of appointment
  stating information relating to qualification and
  working experience of the appointee.
• FSC has power to decide if Actuary or Auditor is
  suitable and if it decides in the negative the
  trustees must terminate the employment of the
  Actuary or auditor.

15
Requirements for Registration of SF

• Trustee, administrator and IM must be registered
  or licensed as case may be
• Fund must be established in Jamaica in connection
  with trade or undertaking carried on wholly or
  partly in Jamaica
• Fund must be established under an irrevocable
  trust
• Principal purpose must be provision of pension or
  annuity on retirement of members or on earlier
  retirement provided in special circumstances
• Sponsor must be a contributor
• Pension benefit derived from sponsors
  contribution must be paid to
• to member only on retirement or
• to spouse beneficiary or personal legal personal
  representative on death of member

16
Requirements for Registration of SF contd

• Ordinary annual contribution by sponsor in
  respect of a member shall not exceed 10 of that
  members annual salary or wages
• Total annual contribution to fund by an active
  member not to exceed 10 of members annual
  salary
• Provision for contributions deducted from
  earnings of employees to be paid over to IM
  within one week of end of month in which
  deductions are made
• Terms of employment must require that
• (i) each employee in pensionable post become
  member of the
• SF and
• (ii) Contributions of sponsor and member to be
  paid to same SF

17
Requirements for Registration of SF contd

• Payment to member who voluntarily retires not to
  commence earlier than ten years prior to
  specified normal retirement age of fund
• SF must satisfy prescribed minimum funding and
  solvency requirements
• Subject to what appears below, pension rights
  shall not be commuted or surrendered and shall be
  non-assignable save for a member allocating a
  portion to his spouse or dependent
• Lump-sum payment may be made as follows
• On death of member in an amount not exceeding two
  years salary or wages or an amount representing
  the actuarial value of members interest in the
  fund, whichever is greater
• On termination of employment other than by death
  or retirement, a refund of members accumulated
  contributions along with interest and an amount
  equivalent to appreciation in value of investment
  units (if any) allocated to the contributions
• On retirement, an amount not exceeding the
  commuted value of ¼ of accrued pension up to
  maximum of 12½ times ¼ of the pension before
  commutation

18
Requirements for Registration of SF contd

• Pension less than prescribed amount may be
  commuted in full
• Maximum annual pension payable not to exceed
  prescribed limit
• Provision is made for information to be given to
  member (no guidance given)
• Provision that member to have recourse to FSC if
  he is of opinion that benefits are being
  jeopardized
• appropriate winding-up provisions to be made in
  trust deed or rules
• Provision for member nominated trustees on terms
  and conditions as may be prescribed
• Must state a normal retirement age between sixty
  and sixty-five years (not specifically included
  in list of requirements for registration (s.
  13(1)) but included in miscellaneous provision s.
  33(1)).
• The foregoing is not exhaustive.

19
Requirements for Registration of RS

• Similar requirements as for SF however there are
  some differences.
• E.g. (i) Members must be self-employed or
  employed in non-pensionable post and do not
  contribute to a SF or other RS.
• (ii) Annual rate of contribution of
  member not to exceed 20 of his/her annual
  income or emoluments.
• Must state a normal retirement age between sixty
  and sixty-five years (not specifically included
  in list of requirements for registration (s.
  13(1)) but included in miscellaneous provision s.
  33(1)).

20
Suspension or Cancellation of Registration or
Licence

• FSC has right to suspend or cancel the
  registration of a trustee or the licence of an
  administrator or IM.
• Act sets out procedure for suspension. For
  example, notice must be given
• (i) stating reasons for suspension and
  right to appeal to Appeals Tribunal
  established under FSC Act
• (ii) requiring the person notified to remedy
  breach within specified time
• (iii) specify a period which the person
  may make written or oral representations to FSC.

21
Suspension or Cancellation of Registration or
Licence contd

• Required procedure for cancellation of licence or
  registration
• Notice must given by FSC stating that it proposes
  to cancel the licence or registration as the case
  may be
• Notice must state the reason for proposed
  cancellation
• Notice must state the right of appeal to Appeals
  Tribunal.

22
Grounds for Suspension or Cancellation of
Registration or Licence

• Registration or Licence may be suspended if there
  is a breach of any provision of Act or
  regulations or if circumstance exist which would
  give rise to any of the specified grounds for
  cancellation (see below).
• Specified grounds for cancellation include
• Licence or registration was procured by
  misleading or false representation in a material
  particular or as a result of any incorrect
  information whether the information or not
  representation was wilfully provided
• Trustee, or any of the persons in relation to an
  administrator or IM who are required to satisfy
  the fit and criteria no longer satisfy that
  criteria and have not been removed from office

23
Grounds for Suspension or Cancellation of
Registration or Licence contd

• Administrator, IM or trustee is carrying on the
  business of the scheme otherwise than in
  accordance with sound pension principles or
  practice
• Unreasonable delay in payment of a pension of
  benefit
• Administrator, IM or trustee without reasonable
  excuse has failed for a period of 30 days after
  the due date to provide the FSC with information
  which is required to be provided under the Act
• Administrator, IM or trustee has been found
  guilty of fraudulent or dishonest practice
• Administrator, IM or trustee has or has been an
  accessory to a contravention of any provision of
  the Act or regulations or any condition,
  direction or requirement imposed by the FSC in
  accordance with the Act
• The breach which has given rise to a suspension
  has not been remedied in the time allowed by the
  FSC.

24
Summary Cancellation

• FSC may summarily cancel a licence or
  registration
• if the administrator, IM or Trustee fails to
  carry on business in the capacity in which it/he
  was licensed registered for a period one year
• Upon the request of any of those persons or
• Upon the resignation of the trustee or RO.

25
Investigatory Powers of FSC

• FSC, being the regulator of the industry, has
  wide powers to ensure compliance with the
  provisions of the Act and Rules and to
  investigate the activities of a scheme including
  the power require the provision of information.
• If FSC is able to satisfy RM (as opposed to JP)
  that there are reasonable grounds for suspecting
  that there are on any premises, specified
  information which was legally requested by but
  not provided to the FSC, the RM may issue a
  search warrant.
• Warrant allows for entry and search of premises
  and seizure and removal of books, accounts,
  documents and statistics.
• Items seized must be returned within two months
  of seizure unless criminal proceedings have been
  brought in relation to the seizure and then upon
  conclusion of proceedings.

26
Termination and Winding-Up of Scheme

• Winding-up may be undertaken either voluntarily
  or under the supervision of the court.
• Either the FSC or the trustees may petition the
  court to wind up the scheme.
• Before either the trustees or the FSC may
  petition the court they must
• give written notice to the members stating the
  reasons for petitioning the court and
• obtain the leave of the court.
• In addition, before trustees can petition court,
  they must
• give FSC ninety days notice of their intention
  to petition the court
• obtain the approval of FSC for petitioning the
  court.

27
Termination and Winding-Up of Scheme contd

• In the case of a voluntary winding-up by the
  trustees, they must first give FSC ninety days
  notice of their intention to wind-up and also
  obtain approval of FSC before taking any steps to
  wind-up.
• The FSC may, with the leave of the court, present
  a petition for winding up on the ground
• that the scheme fails to satisfy any of the
  requirements for registration or that its
  registration has not been renewed and it is in
  interest of members that the scheme be wound up
• the administrator, IM, sponsor, trustee or RO
  refuses to comply with due request of the FSC for
  the provision of certain information and it is in
  interest of members that scheme be wound up
• investigations by FSC reveal that it is in
  interest of members that scheme be wound up or
• scheme is insolvent and it is in interest of
  members that scheme be wound up.

28
Termination and Winding-Up of Scheme contd

• During the period of winding-up and until all the
  assets of fund have been distributed, a scheme
  shall be subject to the provisions of the Act
  e.g. the licences and registration of
  administrators IMs and trustees must be kept
  current and a RO must be kept in place.

29
Termination and Winding-Up of Scheme contd

• Before the winding up of an approved
  superannuation fund, any outstanding
  contributions payable by a member or a sponsor
  and all contributions which were not paid over to
  the IM and any other amount which is due or
  payable to the fund or scheme, as the case may
  be, shall be paid to the trustee or provisional
  trustees on behalf of the fund or scheme.
• Any outstanding contributions (whether of the
  sponsor or the members) not paid over in the case
  of a SF shall be deemed to be a debt of the
  sponsor and shall rank pari passu with employee
  emoluments.
• On a winding-up all active members of the scheme
  are deemed to be vested irrespective of age,
  period of membership or period of employment.

30
Termination and Winding-Up of Scheme contd

• On a winding-up all assets of the scheme must be
  delivered to the trustees.
• Act provides order in which liabilities of scheme
  must be satisfied from assets.

31
Application of Surplus

• If after discharging all the liabilities of
  scheme a surplus exists, trustees must employ
  actuary to verify amount of surplus and forward
  copy of verification to FSC along with proposed
  scheme of distribution.
• FSC shall, having regard to minimal guidelines
  set out in Act, approve scheme of distribution
  with or without amendments.
• Trustees bound to distribute surplus in
  accordance with scheme of distribution as
  approved by FSC.
• Note that FSC would have previously approved deed
  and rules which may have already contained
  provisions for distribution of surplus.
• FSC therefore has power to override provisions of
  deed and rules on issue of distribution of
  surplus.

32
Miscellaneous Provisions

• Scheme must state mandatory retirement age
  between sixty and sixty-five years.
• Every administrator, IM, sponsor and trustee
  required to keep and make available to FSC all
  records relating scheme. Failure to keep records
  offence liable to summary conviction and fine
  not exceeding 1M.
• Trustees must submit to FSC Certified Financial
  Return relating to scheme within ninety days of
  end of financial year of scheme and such other
  report as my be prescribed.

33
Miscellaneous Provisions contd

• Provisions for amendment of deed or rules
  included in Act. Members and FSC approval must
  be obtained.
• FSC may refuse approval if it is of opinion that
  amendments not in best interest of scheme.
• FSC may refuse approval notwithstanding that
  members may have unanimously approved amendment.

34
Miscellaneous Provisions contd

• Member may make complaint directly to FSC he
  feels that his benefits are being jeopardized and
  FSC has duty to make enquiry and take steps as it
  considers appropriate.
• Administrator, IM, sponsor, trustee and RO has
  right to appeal any action decision, ruling,
  direction, order or proposal of FSC.
• Appeal to be made to Appeal Tribunal established
  under FSC Act.
• FSC has power to extend time for doing anything
  under the Act which must be done within specified
  period unless Act already provides for extension.

35
Penalties

• Offence

Maximum Penalty
Performing duties as administrator or IM w/o
being licensed
5M
Performing duties as trustee w/o being registered
2.5M
Sponsoring unregistered SF or RS
5M
Failure by administrator, IM, trustee or RO who
fails to make returns to FSC in time required
(e.g.. Certified Financial Return)
1M in case of individual who is trustee or
RO 2M in case of body corporate
Failure by administrator, IM, sponsor or trustee
to provide FSC with information within time
required or upon request
500K
36
Penalties contd

• Offence

Maximum Penalty
Failure by administrator, IM or trustee to keep
required records
1M
Knowingly filing incorrect returns with FSC -
administrator, IM, trustee or RO
1M or 12 months in case of individual 2M in
case of body corporate
Failure by administrator or RO to notify FSC of a
person ceasing to hold post of RO in required time
500K
Failure by sponsor to pay over to IM,
contributions deducted from salaries or wages of
members within 14 days of end of month in which
deduction is made
3M
37
Penalties contd

• General penalty contravention of any provision
  of Act for which no penalty is provided - 3M or
  imprisonment for 2 years (maximum)
• Some penalties are likely to change given the
  recent position taken by the Senate in refusing
  to pass the Regulations.
• End of presentation
• Paul Tai May 27, 2005