& nbsp
Author: Antonio Spence, Head, NCB Insurance Agency and Fund Managers Limited
Jamaica, a dynamic and culturally diversified country of the Caribbean, is known for its reggae music, its superb white sandy beaches and its warm hospitality. However, under the surface of this paradise there is a significant problem which seems unnoticed: low economic protection for people over 65.
Research in 2022 by the Regional Bureau of the International Labor Organization (ILO) for Latin America and the Caribbean revealed that more than a third of retirees are faced with a dark reality. The ILO report, overview of social protection in Latin America and the Caribbean states, “the proportion of elderly people without labor income or pension increased from 31.9% in 2019 to 34.6% in 2020 and 34.5% in 2021. This coverage difference has been the highest since 2012.”
This alarming statistic represents a disturbing trend and is still exacerbated by the economic challenges that Jamaicans are currently faced with access traditionally limited to socio-economic protection networks over the years.
According to quarterly private industry statistics published by the Financial Services Commission (FSC) In 2014, the Jamaicans registered with a private retirement agreement totaled 101,066. Ten years later, total registrations amounted to 163,958 – an increase of 62% of registrations during the period. When the total active population in Jamaica is considered to be around 1.3 million, this means that only 12.4% of adult Jamaicans have a pension plan. This weak adoption is a disturbing indicator of Jamaica’s socio-economic well-being.
This reality raises the question: what are the systemic obstacles to the broader adoption of the savings of pensions in Jamaica? How can institutions with capacity and capacity work to move this deep and concerned reality so that there can be more involvement in retirement planning? As part of NCB Financial Group, the largest financial institution in Jamaica (by Asset Base), the NCB insurance agency and fund managers (NCBIA) plays a vital role in the country’s financial landscape. This position gives the NCBIA a unique overview of the economic challenges with which the Jamaicans are confronted. The company is aware of some of the nuances that shape the financial behavior of the Jamaicans through economies, investments, insurance, payments and pensions. From our point of view in industry, many obstacles have been cultural and economic in nature and are at the heart of the slow adoption of pension plans. Institutions must therefore work intentionally to change this reality as quickly as possible.
Cultural meaning of the family structure
The Jamaicans give great value to the extended family, where children often provide financial support to their parents in their old age. This cultural standard has been deeply rooted for generations and has played an important role in the priority of investments in formal pension patterns. Many Jamaicans think that their children take care of them in their old age, which makes them less inclined to save for retirement.
Although this reality could have been true in past times, many millennials and young generations are now faced with significant financial obligations such as their student loan debt, the cost of housing (rent or mortgage) and the cost of their own subsistence costs. This situation creates an enigma for the older parent and the young adult. In most cases, the two prioritize the immediate needs compared to future savings, leaving pensions planning as another activity “pleasant to do”.
Dependence on informal economy
Jamaica’s economy has a substantial segment of workers in roles such as hairstyle, hairdresser, sale, carpentry, masonry, plumbing, small -scale agriculture and other independent or relaxed works. Participants in this informal economy often do not participate in formal pension plans. The reality is that, traditionally, access to such regimes was non -existent outside to be officially employed, leaving individuals to fend for themselves during retirement savings. This shows in the behavior of the Jamaican population, which is based on less formal financial structures such as “launching a partner” – a collective savings activity without interest.
The dependence on informal means to save for his retirement is still amplified by the fact that, historically, access to a pension plan was limited to the Jamaicans employed by an institution that positioned pensions as employment services. Given this positioning, and despite the advent of approved private retirement plans, where people in the informal section can be established and benefit from an official retirement arrangement, individuals have always considered official pension plans as an option that is too complicated to understand or something intended for the blue passes or richer people.
Mistrust of financial institutions
Another cultural obstacle to pensions in Jamaica. This distrust is fueled by various historical and socio-economic factors. The infamous financial collapse in the 1990s, which led to significant losses for investors, left a lasting impression on many Jamaicans. Mistrust has been amplified by recent and repeated fraud incidents in the financial sector. Unfortunately, this distrust continued the official planning of pensions, while people are home to skepticism to entrust their harshly won retirement savings to these institutions. With the deep obstacles to the wider adoption of pensions planning in Jamaica, institutions such as NCB Insurance Agency and fund managers had to implement strategies aimed at facilitating access to pension funds and serving as defenders of average Jamaican because they are more widely looking for participation in this aspect of financial planning.
Education and awareness
The first step to overcome cultural obstacles is to continue to educate the population about the importance of pensions and long -term financial planning. Public awareness campaigns, workshops and seminars can help dispel myths and false ideas about pensions and strengthen confidence in the official financial sector. NCBIA recently launched a solid public education campaign to help position pensions planning as an essential component of a wealth preservation plan. The retirement initiative as a boss “seeks to go to the heart and mind of the members of the informal economy, by explaining their inherent nature to survive in their current life and using this call to encourage them to prosper also after retirement.
This low adoption is a disturbing indicator of the socio-economic well-being of Jamaica
Similarly, increased awareness must be carried out around the performance of pension funds and the way it increases well for investors and beneficiaries of pensions. Often, the news of the financial and economic challenges highlights the negative performance of the pension funds invested.
While industry players defend increased participation among Jamaicans, the positive performance of said funds should be said. In this vein, the NCBIA is proud to boast of an enviable performance of its pension funds, offering an average composite return at 10 years of 11.4% at the end of 2023.
Cultural sensitivity
Decision -makers and financial institutions should be culturally sensitive in their approach to promotion of pensions. By understanding the strong family obligations in Jamaica, they can emphasize how retirement savings can supplement rather than replace family support for retirement. Likewise, the understanding and commitment of the new workforce will oblige financial institutions to rethink the position of pension planning. The imagery of the “rich person” on a beach somewhere, while the desired reality, was not the experienced reality of many millennials and the generation Z and their parents retired. As such, the creation of a vision of the “real” future must be reinvented by industry players and reflected in their efforts to increase private pension plans.
Ease of access
Pension providers must provide online platforms to allow informed millennials and access to the Z generation to these services without the need to visit a physical location. In addition, customers who engage with financial institutions in physical locations should be introduced to pension planning at all points of integration or maintenance, given the positive impact that a retirement agreement will have on their financial future. The NCBIA is proud to be one of the precursors of Jamaica to provide an entirely digital application process to its customers. Our NCB Pensions portal allows customers to select the funds in which they want their savings to be invested and to select how their savings must be allocated between different funds. Once registered, customers can also follow their pension fund performance via the portal. Such solutions should see a change in the number of retirement plans active in society as soon as possible.
The government
Finally, the role of government in the creation of an empowering environment for pension planning is imperative. In Jamaica, important work must be done to make industry more susceptible to modern realities. However, given the threat of the socio-economic fabric of the company provoked by a financially unstable and aging company, it is imperative that the government is seriously planning to make the participation of pensions compulsory for all people earning income in Jamaica. This is a necessary step to quickly improve the retirement fortune of hundreds of thousands of Jamaicans. Organizations such as the Pensions Industry Association of Jamaica, of which the NCBIA is part, continues to put pressure for the adoption of automatic retirement registrations, which constitutes a key pillar in our advocacy strategy for the well-being of the Jamaicans. In fact, the Jamaican government has already taken positive measures through the creation of the retirement regime for tourism workers, which is a positive step in the right direction. The NCBIA is of the opinion that this approach, applied at the national level, will inaugurate a better day for so many Jamaicans who work hard.
In conclusion, Jamaica’s cultural and economic obstacles to the adoption of pensions planning are deeply rooted and multiple, which makes them difficult to solve. However, with the right mixture of education, innovation and government support, these obstacles are gradually overcome. Pensions are not only for the office worker, the wealthy or the sophisticated investor. Living the best life after retirement should be an expectation for all Jamaicans, and it is the mantra who continues to lead us to the NCBIA while we play our role in the construction of a better Jamaica.