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

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Objects
‡ To provide ³overall reform of the pensions system´ ‡ ³Make provision for the management of superannuation funds and approved retirement schemes and for matters connected therewith and incidental thereto´

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Scope
‡ Special provisions are made for specified funds of schemes ± those established by law ‡ It is illegal to operate a superannuation fund (³SF´) and retirement scheme (³RS´) unless same is registered with Financial Services Commission (³FSC´). ‡ All trustees must be registered. ‡ All administrators and investment managers (³IM´) must be licensed.
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‡ Trustee must notify FSC of designation of administrator and IM within 14 days of designation. 4 . ‡ Only companies having the power through its Memorandum of Association or Articles of Incorporation may be licensed as administrators and IMs.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.

Licensing and Registration cont¶d ‡ Administrators and IMs may only be licensed if: ± all the members of its Board. assistant manager. accountant and company secretary or the person(s) who carries out the duties of such persons. ± its manager. and ± its designated responsible officer meet the fit an proper criteria set out in Act. 5 . ‡ 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. diligence and sound judgment ‡ Must have knowledge and experience in the business of SFs and RSs and ‡ Not incapacitated by reason of mental disability. able to exercise competence.

± its affairs are managed by qualified and capable persons. an IM may only be licensed if: ± it adheres to standards of sound business and financial practices in its operations. ± 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.Licensing of Investment Managers ‡ In addition to the foregoing fit and proper criteria. 7 . and ± it is licensed dealer under Securities Act. ± it meets prescribed capital base.

8 .Licensing of Investment Managers cont¶d ‡ Same company may be designated as administrator and IM provided they are licensed in both capacities.

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. 9 . an applicant which meets all the fit and proper criteria. ‡ In the case of an applicant who is an individual.Registration of Trustees ‡ FSC must register as a trustee in the case of a company.

IM and corporate trustee must appoint a responsible officer (³RO´) within their company. 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. for the general administration of the scheme including the keeping of records and accounts. ‡ RO must do everything required: ± in the case of an administrator. ‡ RO must then within thirty days apply to FSC to be registered as RO.Responsible Officer ‡ Every administrator. 10 . ± in the case of an IM.

11 . 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 company¶s affairs.Responsible Officer cont¶d ‡ 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.

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. 12 .

± a person. officers or employees. IM. 13 . IM. ‡ Employee is defined to mean a permanent. ± member. or sponsor or an employee. who is an affiliate of an administrator. parttime or contract worker. or the spouse or child of a person.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. officer or director of such affiliate. trustee or any of their directors.

Appointment of Actuary and Auditor cont¶d ‡ 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. 14 . ‡ 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.

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 sponsor¶s contribution must be paid to: ± to member only on retirement. or ± to spouse beneficiary or personal legal personal representative on death of member 15 .

Requirements for Registration of SF cont¶d ‡ Ordinary annual contribution by sponsor in respect of a member shall not exceed 10% of that member¶s annual salary or wages ‡ Total annual contribution to fund by an active member not to exceed 10 % of member¶s 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. 16 .

(ii) On termination of employment other than by death or 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.* Lump-sum payment may be made as follows:* (i) On death of member in an amount not exceeding two years salary or wages or an amount representing the actuarial value of member¶s interest in the fund. 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. whichever is greater. (iii) On retirement. 17 .Requirements for Registration of SF cont¶d ‡ ‡ ‡ ‡ 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. a refund of member¶s accumulated contributions along with interest and an amount equivalent to appreciation in value of investment units (if any) allocated to the contributions.

13(1)) but included in miscellaneous provision s. 33(1)).* ‡ 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 ‡ ³appropriate 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.Requirements for Registration of SF cont¶d ‡ Pension less than prescribed amount may be commuted in full. 18 . The foregoing is not exhaustive.

‡ E. (ii) Annual rate of contribution of member not to exceed 20% of his/her annual income or emoluments. 13(1)) but included in miscellaneous provision s. 19 . ‡ Must state a normal retirement age between sixty and sixty-five years (not specifically included in list of requirements for registration (s. ± (i) Members must be self-employed or employed in non-pensionable post and do not contribute to a SF or other RS. 33(1)).g.Requirements for Registration of RS ‡ Similar requirements as for SF however there are some differences.

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. (ii) requiring the person notified to remedy breach within specified time. ‡ Act sets out procedure for suspension. notice must be given: (i) stating reasons for suspension and right to appeal to Appeals Tribunal established under FSC Act. 20 . (iii) specify a period which the person may make written or oral representations to FSC. For example.

(ii) Notice must state the reason for proposed cancellation.Suspension or Cancellation of Registration or Licence cont¶d ‡ Required procedure for cancellation of licence or registration: (i) Notice must given by FSC stating that it proposes to cancel the licence or registration as the case may be. 21 . (iii) Notice must state the right of appeal to Appeals Tribunal.

‡ ‡ 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: (i) 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. 22 Grounds for Suspension or Cancellation of Registration or Licence (ii) . 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.

Grounds for Suspension or Cancellation of Registration or Licence cont¶d (iii) (iv) (v) Administrator. IM or trustee has been ³found guilty´ of fraudulent or dishonest practice. IM or trustee has or has been an accessory to a contravention of any provision of the Act or regulations or any condition. 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. The breach which has given rise to a suspension has not been remedied in the time allowed by the FSC. direction or requirement imposed by the FSC in accordance with the Act. Administrator. Administrator. Unreasonable delay in payment of a pension of benefit. IM or trustee is carrying on the business of the scheme otherwise than in accordance with sound pension principles or practice. Administrator. (vi) (vii) (viii) 23 .

24 . (ii) Upon the request of any of those persons. or (iii) Upon the resignation of the trustee or RO.Summary Cancellation ‡ FSC may summarily cancel a licence or registration : (i) 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.

25 . ‡ Warrant allows for entry and search of premises and seizure and removal of books. 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. the RM may issue a search warrant. documents and statistics. specified information which was legally requested by but not provided to the FSC.Investigatory Powers of FSC ‡ FSC. ‡ 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. accounts. ‡ If FSC is able to satisfy RM (as opposed to JP) that there are reasonable grounds for suspecting that there are on any premises.

Termination and Winding-Up of Scheme ‡ ‡ ‡ Winding-up may be undertaken either voluntarily or under the supervision of the court. and obtain the leave of the court. ‡ In addition. Either the FSC or the trustees may petition the court to wind up the scheme. they must: (i) (ii) give FSC ninety days¶ notice of their intention to petition the court. Before either the trustees or the FSC may petition the court they must: (i) (ii) give written notice to the members stating the reasons for petitioning the court. obtain the approval of FSC for petitioning the court. 26 . before trustees can petition court.

Termination and Winding-Up of Scheme cont¶d ‡ ‡ In the case of a voluntary winding-up by the trustees. with the leave of the court. the administrator. or scheme is insolvent and it is in interest of members that scheme be wound up. present a petition for winding up on the ground: (i) (ii) 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. 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. sponsor. (iii) (iv) 27 . investigations by FSC reveal that it is in interest of members that scheme be wound up. 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. The FSC may. IM.

Termination and Winding-Up of Scheme cont¶d ‡ 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. 28 . the licences and registration of administrators IMs and trustees must be kept current and a RO must be kept in place.g.

shall be paid to the trustee or provisional trustees on behalf of the fund or scheme. ‡ On a winding-up all active members of the scheme are deemed to be vested irrespective of age.Termination and Winding-Up of Scheme cont¶d ‡ ³Before the winding up of an approved superannuation fund. 29 .´ ‡ 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. as the case may be. period of membership or period of employment. 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.

‡ Act provides order in which liabilities of scheme must be satisfied from assets. 30 .Termination and Winding-Up of Scheme cont¶d ‡ On a winding-up all assets of the scheme must be delivered to the trustees.

‡ FSC shall.Application of Surplus ‡ If after discharging all the liabilities of scheme a surplus exists. ‡ Note that FSC would have previously approved deed and rules which may have already contained provisions for distribution of surplus. ‡ Trustees bound to distribute surplus in accordance with scheme of distribution as approved by FSC. approve scheme of distribution with or without amendments. having regard to minimal guidelines set out in Act. ‡ FSC therefore has power to override provisions of deed and rules on issue of distribution of surplus. 31 . trustees must employ actuary to verify amount of surplus and forward copy of verification to FSC along with proposed scheme of distribution.

32 . 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. IM. ‡ 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.Miscellaneous Provisions ‡ Scheme must state mandatory retirement age between sixty and sixty-five years. ‡ Every administrator.

Miscellaneous Provisions cont¶d ‡ Provisions for amendment of deed or rules included in Act. ‡ FSC may refuse approval notwithstanding that members may have unanimously approved amendment. 33 . Members¶ and FSC approval must be obtained. ‡ FSC may refuse approval if it is of opinion that amendments not in best interest of scheme.

direction. ‡ 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. 34 .Miscellaneous Provisions cont¶d ‡ 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. ‡ Appeal to be made to Appeal Tribunal established under FSC Act. sponsor. trustee and RO has right to appeal any action decision. ruling. IM. order or proposal of FSC.

Certified Financial Return) Failure by administrator.Penalties Offence Performing duties as administrator or IM w/o being licensed Performing duties as trustee w/o being registered Sponsoring unregistered SF or RS Failure by administrator. IM. IM..g.5M $5M $1M in case of individual who is trustee or RO $2M in case of body corporate $500K 35 . sponsor or trustee to provide FSC with information within time required or upon request Maximum Penalty $5M $2. trustee or RO who fails to make returns to FSC in time required (e.

administrator. contributions deducted from salaries or wages of members within 14 days of end of month in which deduction is made $3M 36 . IM.Penalties cont¶d Offence Failure by administrator. trustee or RO Maximum Penalty $1M $1M or 12 months in case of individual $2M in case of body corporate $500K Failure by administrator or RO to notify FSC of a person ceasing to hold post of RO in required time Failure by sponsor to pay over to IM. IM or trustee to keep required records Knowingly filing incorrect returns with FSC .

2005 37 .$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.Penalties cont¶d ‡ General penalty ± contravention of any provision of Act for which no penalty is provided .