24th Annual Caribbean Actuarial Association Regulatory Updates - Pensions. Randy Graham Chief Executive Officer December 5, 2014

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1 24th Annual Caribbean Actuarial Association Regulatory Updates - Pensions Randy Graham Chief Executive Officer December 5, 2014

2 OCCUPATIONAL PENSIONS BENEFIT ACT (OPBA)

3 Introduction The Financial Services Commission (FSC) is the regulator for non-bank financial institutions including insurance, pensions, credit unions, securities, and mutual funds in Barbados It was established as an integrated regulatory body on April 1, 2011 by virtue of the Financial Services Commission Act (2010)

4 FSC and the OPBA FSC s role in the occupational pensions sector in Barbados thus encompasses the following elements: o being the supervisory and regulatory authority for occupational pensions o ensuring the protection of members interests o promoting the solvency of occupational pension plans licensed under the relevant Pension Act as a going concern o facilitating the orderly functioning of the occupational pensions industry 4

5 Pension History in Barbados Reform of pension legislation may be traced to constitutional and social developments in Barbados Various legislation in the 1960s improved pension provisions for public sector employees Some social issues to be managed which related to pensions included: o people living longer o an ageing population o new financing mechanism o changing economic situations

6 Pension Reform in Barbados The first pillar of retirement funds available is the National Insurance Scheme (NIS) social factors threatened a potential drain from public pensions and reform was sought to ensure Barbados maintained suitable pension coverage funds Barbados started to increase contributory rates for social security in 2003 The informal sector was encouraged to make voluntary contributions

7 Pension Reform in Barbados The retirement age was raised in 2006 and continues to be marginally increased until 2016 when the eventual normal retirement age will be 67 years Options were made available for early retirement at reduced benefit These were all aimed at increasing the pension coverage in Barbados 7

8 Pension Reform in Barbados Having set the plan in motion to reform the public pension arena, a plan was also put in place to reform private pensions The Occupational Pension Benefits Act, 2003 Cap 350B was passed in 2003 but did not come into effect until February 1, 2011; the Occupational Pension Benefits Regulations, 2011 were published on February 14, 2011 The Act provides for the establishment, management and registration of Occupational Pension Plans

9 Updates on Pension Reform in Barbados Some of the major changes from the reform include: o provision of definition, role and responsibilities of the Plan Administrator o requirement of plan text and prior approval by FSC o provision of a statement of investment policy required o regulation of late payment of contribution by FSC o funds to be held in trust and disclosure needed by custodian

10 Updates on Pension Reform in Barbados o defined period noted for qualification of membership to a pension plan o fees for registration and review charged o amendments to plan text must be registered to be valid o changes were made to the vesting period o funds locked in with conditions on the form indicating which funds can be withdrawn at retirement or termination portability of funds at termination draw down of lump sums at retirement

11 Regulatory Updates to the OPBA Some of the administrative challenges encountered following the implementation of the OPBA included: o Additional regulatory resources were needed: staffing and training training for Trustees and discussions with auditors regulatory frameworks and on-site inspection models historical data and actuarial support evaluation of the investment vehicles for pension plans management of supportive IT systems

12 Regulatory Updates to the OPBA o Time management was critical (Risk Based Supervision Tool) o Consideration had to be given for legislative interpretation by stakeholders of the new Act and new guidelines o Application and testing of new Act required time 12

13 Statistical Break Down Membership Range < > Total

14 Statistical Breakdown Agriculture/Energy/Manufacturing 31 10% Construction 11 4% Education 10 3% Financial/Insurance 67 22% Other 54 18% Sales/ Distribution 51 17% Services 42 14% Communications/Media 8 3% Tourism Sector 31 10% 14

15 Statistical Breakdown 15

16 The Way Forward for Regulation Review of existing legislation, reporting forms and data requirements Review of multi-employer/multi-unit structures Evaluation of actuarial support and record keeping resources Evaluation of investment vehicles being used by pension plans Improvement in the regulatory framework to better evaluate inherent risk 16

17 #34 Warrens Industrial Park, Warrens, St. Michael, Barbados BB22026 Randy Graham Chief Executive Officer December 5, 2014 THANK YOU