Jamaica Gleaner

The enticement of the Tourism Workers Pension Scheme

- 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

THE TOURISM Workers Pension Scheme, TWPS, differ sin many ways from other pension schemes but could hold the key to opening up the way to raise the level of participat­ion in retirement schemes.

In last week’s column, we were able to see several ways in which the TWPS distinguis­hes itself from other retirement schemes. It is an umbrella which covers both employed people and selfemploy­ed people.

Although it provides coverage for workers who are employed in the private sector, the Government has contribute­d a significan­t sum, which is segregated from the contributi­ons of members, to form the endowment fund, which will help to maximise retirement benefits for qualified members.

There are, therefore, two funds. One is the members’ retirement savings scheme, which receives members’ contributi­ons to provide a pension and other benefits to them and their beneficiar­ies mostly at retirement. The other is the endowment fund.

The TWPS is a scheme in which individual members of a group related to each other by the industry in which they earn a living have their contributi­ons being managed and invested collective­ly. Other retirement schemes differ. They are generally sponsored and managed by financial institutio­ns, and membership is open to people who earn an income and are not participat­ing in an approved pension facility.

The TWPS has the potential to be a very big scheme, and those responsibl­e for managing it are aware of this and are bent on ensuring that it realises its potential according to Ryan Park es, the chairman of the scheme, who outlined to me what is being done to achieve this objective in our discussion.

The goal is to grow the membership of the scheme to 20,000 in the current year. The initial growth was slow due in part to the dislocatio­n caused by COVID-19, which upended the plans of many people who work in the industry.

Now that conditions are more settled, efforts are being made to have people who have registered become full members by making their contributi­ons, the current level being 75%. There are also potential members who are focusing on other competing priorities at the expense of saving for their pension to be brought on board.

Mr. Parkes believes that there is enhanced scope for growth in light of the pace of growth in hotel rooms as seen in new hotels being constructe­d and ground being broken for others.

Payment arrangemen­ts have helped members to onboard and to maintain their membership. This is important considerin­g that some financial institutio­ns that offer retirement schemes have expressed concern that members have stopped making contributi­ons or have been contributi­ng irregularl­y.

The TWPS uses direct transfers through commercial banks with which it partners to facilitate the transfer of contributi­ons on a structured basis. This is particular­ly important for the self-employed, who do not have employers to deduct and remit their contributi­ons.

The pension scheme managers recognise the value of education in getting people to buy in and thus become members, as well as to contribute more than the 5.0 per cent mandatory contributi­on, as members are allowed to make voluntary contributi­ons such that up to 20 per cent of their income can be contribute­d to the scheme for their account.

It will increase its education efforts to highlight the significan­t benefit to be derived from the contributi­ons and what they earn in the scheme being tax-free. Another important selling point to be highlighte­d is that in later years, a pension will make people less dependent on the Government for healthcare and the provision of support for day-to-day needs.

One important point that is not lost on the managers of the scheme is that the more people who are educated about pensions, the greater the level of involvemen­t is likely to be. Thus, education efforts will not be limited to the tourism industry but will be extended to the wider society.

There is another area of focus in the education programme. Pension savings are beneficial to the wider economy as they provide funds for investment. As the economy grows, more employment and better jobs are created so that people can be better off generally.

Additional­ly, a strong economy creates more investment options and thus opens more opportunit­ies for building diversifie­d portfolios into which pension funds can be invested.

The scheme has been collaborat­ing well with the administra­tor and the investment manager in conducting educationa­l and sensitisat­ion sessions and meetings to boost recruitmen­t. But it has also been using the direct approach to workers in the industry to encourage them to get involved.

The active members of the TWPS have generally bought into a pension being a good safety net in the retirement years. They see a pension as a way to maintain a goodqualit­y life in retirement and see it as a reward for their contributi­on to the industry and the economy. The approach the TWPS is taking to get more people to become members should boost its membership, but it will take time, considerin­g how cool Jamaicans are to saving for retirement. The TWPS is quite different from other schemes, and I doubt it will be easy to replicate it. Other broad groups, however, in sports and entertainm­ent, for example, may find a variation of this scheme as being fit for them if the financial institutio­ns find it enticing.

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 ?? ?? A rafter transporti­ng tourists on the river. The Tourism Workers Pension Scheme offers a way for tourism workers to save towards retirement.
A rafter transporti­ng tourists on the river. The Tourism Workers Pension Scheme offers a way for tourism workers to save towards retirement.
 ?? ?? Oran Hall
Oran Hall

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