Understanding the relatively complex area of pensions is not necessarily easy when workers have widely varying educational levels. Prior to the Pensions Act’s promulgation in 2004, a good understanding of proper pension practices was restricted to actuaries, a few professional trustees and the shrewd businessman whose main interest was not the preservation of benefits for employees upon retirement. However, there can be little doubt that the laws and regulations affecting pension plans in Jamaica now recognize the importance of best practices in relation to plan disclosures and communications.
Regulation 12 of the Governance Regulations under the Pensions (Superannuation Funds and Retirement Schemes) Act (“the Pensions Act”) provides that:
“Information disclosed to participants, beneficiaries and their representatives shall be clear, accurate, complete and timely and where the use of technical jargon is unavoidable it shall be accompanied by an explanation in simple language.”
The law is one thing, but, in the Jamaican context, some questions remain to be explored. Is Regulation 12 being observed by pension trustees and employers? I doubt that there is any unanimity in the response to this. Some pension plans do a commendable job in ensuring that this and similar Regulations are seriously being taken to heart. Meetings between trustees and members are held frequently and the content of communications is clear and comprehensive.
However, there are other plans where mere lip-service is paid to the best practices of plan disclosures and communications. Not only are meetings with plan members held infrequently, but oftentimes there is insufficient sensitivity to the lack of familiarity with pension plan practice.
Clarity of communication is even more important in a traditionally high interest rate environment in which employees sometimes struggle to understand the basic pension philosophy which proclaims: “don’t spend now – provide for later.”
The effective dissemination of information to the members of a pension plan is just as important as the use of simple language in pension plan documents. The Pension Regulations stipulate that new members are to be supplied with a free copy of the members’ handbook upon joining the plan. The trustees are also to prepare and distribute benefit statements annually, which ought to contain general information on the plan as well as the member’s accrued benefits as at the end of the statement period.
Arguably, the Electronic Transactions Act should aid in the discharge of these duties as it facilitates electronic communication if both parties consent. The danger of electronic communication is, of course, that it can sometimes satisfy the requirement of communication without having the assurance that there is genuine understanding of the subject of the communication. Whether all employees have sufficient access to computers is another issue.
There is still some doubt as to whether the Pension Act and the Regulations there under should be amended to specifically address electronic communication. Amendment of the Pensions Act and Regulations is probably unnecessary but may still not be a bad idea to put the point beyond question.
The Regulations also provide for members to be provided with copies of the Trust Deed and Rules of the Plan and to receive Information Folders which contain: a description of the Plan’s operations; fees and taxes; the scope and limitation of investments; descriptions of application of earnings and explanation of risks and statement of values and rates of return.
There exists considerable doubt; however, whether the disclosures and communications made to members genuinely assists them in the financial literacy which is key to understanding benefit statements, options offered to members on winding-up, plan conversions and the like. It is one thing to be clear and avoid technical jargon; it is quite another to arm members with the knowledge and understanding they need in order to make reasonable decisions about their future.