Pension Legislation, Why is it necessary.

In December 2008 the Government of the Bahamas formed a committee to look into the possibility of establishing Pension Legislation in the Bahamas within the next four years. Pension legislation was something successive governments have spoken about but nothing was ever done. We commend the present Government for putting into motion the necessary steps to look at establishing pension legislation.

In the Bahamas we will face an even more pressing situation because a large percentage of our population is under the age of 35, which means in 30 years they will all be retired. With Bahamians having less children, we need to find ways to encourage individuals to save more towards their retirement. The enactment of pension legislation will help our long-term social and economic stability.

Less than 30% of businesses in the Bahamas have a pension plan; the Central Bank of the Bahamas released statistics that showed the average bank account has less than a $1,000 balance. That coupled with the fact that we as a nation are a society of spenders and not savers, we live for today and let tomorrow take care of it self, will lead us to eventual social disaster if something isn’t done.

For individuals to enjoy a comfortable retirement they would need 70% of their final year’s income to maintain the same lifestyle they enjoyed while they were employed. If an individual still has a mortgage it is estimated that they will need approximately 110% of their final year’s income to maintain that same lifestyle. Individuals should look at retirement as a three prong approach. They should look at National Insurance, Personal Savings and a Company Sponsored Pension Plan when planning for their retirement.

With National Insurance being the most far-reaching piece of social legislation enacted to date and with the possibility of the Fund going broke by the year 2029, without some form of safety net in the system for individuals, history has shown that governments are forced to bear the full burden of support for it’s citizens.
Pension Funds will be among the fastest growing pool of assets in the country. In the Survey of Private Pension Plans In The Bahamas (2006-2007) it indicated that, sponsored pension assets rose at a strengthened pace to approximately $1.1 billion by 2007, consolidating continuous average yearly gains from an estimated low of $300 million in 1992.”

With the amount of pension fund assets under management and there being no legislation, the Government’s push for legislation enactment is two fold; that being protection of existing assets and to provide and additional piece of social legislation for protection for its citizens.

The committee at a minimum should consider the following when developing the draft legislation:

• Segregation of pension assets
• Establishment of a trust document
• Annual audits
• Tri-Annual actuarial review
• Minimum reporting requirement
• Portability
• An Independent Regulatory Body
• Licensing and Registration Requirements
• Fit and Proper Persons Requirements

With the enactment of pension legislation it will encourage employees to take a greater responsibility for providing for their long-term financial security and in the process lessening the dependence on government to provide benefits for every citizen.