Persons should contribute to a pension scheme to ensure retirement income and also as a way to supplement social security and personal savings and lessen the dependence on others says Othneil Blagrove, senior manager – Sales and Marketing, JN Life Insurance Company.
The insurance executive who has worked insurance for many years explained that when persons are a part of an approved pension scheme, fewer resources of the state will have to be directed to elderly persons should an unfortunate situation arise.
“Persons should contribute to a pension scheme to ensure retirement income and also as a way to supplement social security and personal savings. When persons are a part of an approved pension scheme, fewer resources of the state will have to be directed to elderly persons should an unfortunate situation arise. This is one of the areas where pension contributions are vital to economy because they reduce the burden on the state,” he explained.
The senior manager explained that a pension plan is an employee benefit drawn from monies pooled, and, or invested in order to fund payments at retirement. He said persons should also inform themselves of the various ways to plan for retirement and also about the two main types of approved pension plans.
“There is the approved superannuation funds which is for employers’ pension arrangements and the approved retirement scheme, which is a pension plan for the self-employed and individuals who are not a part of an employer’s pension arrangement,” he said.
He added that it was important for people to understand the difference in the two plans.
“The approved superannuation funds is the pension arrangement most employers have in place. Under this arrangement, employers with this type of plan require that their full-time employees make a mandatory contribution to the plan as a condition of employment,” he informed.
“For this arrangement, an employer may contribute a percentage and the employee contributes a mandatory amount of their salary. By law, the maximum allowable contribution that can be made in any year to a pension plan is 20 per cent of someone’s annual remuneration/salary,” he added.
Mr Blagrove informed that individuals who are self-employed, or are not part of an approved superannuation fund are also able to benefit from a pension plan when they retire.
“They can join an approved retirement scheme, such as the JN Individual Retirement Scheme. Unlike the approved superannuation fund, in an approved retirement scheme there is no mandatory contribution rate, but the individual must contribute at least once annually and the contribution can be up to the maximum of 20 per cent of their income. I will also take the opportunity to encourage people who are self-employed to start as early as possible because the more money you are able to put towards your pension, the greater your sum at retirement,” he said.
He said many individuals often associate pensions with those in their golden years. However, this should not be the case.
“At present, many Jamaicans associate pension with seniors, often someone who may not be in a position to provide for themselves and are forced to rely on their children or the goodwill of others. However, it does not have to be so. A pension can actually mean that an individual is able to live comfortably and enjoy the same, or even a better quality of life than they did when they were able to work,” he added.
He explained that pensions also have long-term benefits not just to those who contribute, but to the economy as well. He added that the funds represent a significant pool of resources that can be used to advance development in areas such as infrastructure, health care and education. The pension funds are normally invested in various assets such as securities, stocks bonds, real estate, commercial paper and repurchase agreements which help to provide a steady stream of income that can be used for consumption or more investment which helps to grow the economy.
