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Pensions values on the mend but concerns remain

Pension valuations are recovering but require stronger oversight to detect fraud, according to the acting director general at the Financial Services Commission, Major Keron Burrell.

“Recent scandals have shown that the framework for fighting financial crime is not as effective as desired,” said Burrell at the start of the Caribbean Association of Pension Supervisors conference in New Kingston.

Those scandals include alleged financial fraud at Stocks & Securities Limited, which drew international headlines. Burrell said that effective governance, accountability and conduct within institutions are essential for the sector to be resilient and trustworthy.

“A thorough review of the consumer protection and the market conduct framework is exceedingly important to address risk and emerging trends,” he said.

He suggested that pension trustees and managers stay abreast of industry trends and regulatory updates to carry out their duties effectively.

“We must remain connected and engaged. By sharing knowledge and best practices, we can collectively work to improve management and oversight of pension plans in the Caribbean,” he said at the conference.

Burrell noted that some pension funds are showing signs of recovery from the losses of 2022. The aggregate value of assets invested in the Jamaican private pensions industry as at December 2022 was $703.2 billion, according to the private pensions industry data compiled by the FSC. The figure represented a 1.8 per cent increase over the September 2022 quarter, at $690.9 billion, but down 1.42 per cent from $713.4 billion at December 2021.

During the 2022 calendar year, eight pension plans commenced winding-up proceedings, leaving 364 active pension plans. Some 96 per cent of the remaining active pension plans were solvent, the data indicated.

Total private pension assets reported a reduction in value for three consecutive quarters of 2022. However, the increase in the final quarter of the period was attributable to an increase in most of the reported asset classes. While asset values were changing, the top three asset classes remained the same, with investments in pooled arrangements being the top class at 39 per cent, followed by stocks at 21.7 per cent, and government securities at 21 per cent.

“Signs of stress are starting to appear in some financial market segments, as investors are reassessing risk and credit conditions. These are elements currently affecting pension plans,” said Nicolette Jenez, president of the Caribbean Association of Pension Supervisors and deputy executive director of the FSC.

She said that the region’s challenges include poverty, inflation, pandemic-induced financial market turmoil, and low growth.

The Caribbean Association of Pension Supervisors was incorporated in 2010 and was the brainchild of several pension regulators in the Caribbean. CAPS now has 20 members.

The conference, featuring experts from Jamaica, Canada, the United Kingdom and the Unites States, is focused on building up pension holdings amid uncertainty and risk.

“The decisions we make, the actions we take, and solutions we develop during this conference could well have a lasting impact on the lives of millions of people in our region,” said Jenez.

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