PIAJ to lobby for FX limit increase for Jamaican pension industry

The Pension Industry Association of Jamaica (PIAJ) says it is ready to advance a further proposal for the Bank of Jamaica (BOJ) to revisit the existing limits applicable to foreign assets that private pension funds can include in their portfolio mix. The private pension industry, which comprises more than J$745 billion in assets, would benefit from increasing the types of foreign currency assets that pension funds can purchase instead of being confined to only highly rated fixed-income investments.

This move would help pension funds further diversify their portfolios with respect to asset types, reducing a pensioner’s exposure to risks such as foreign exchange devaluation. “Being able to increase the percentage of foreign currency assets that pension funds can invest in allows fund managers to access a wider variety of instruments that could result in greater returns and asset growth for contributors,” said Sanya Goffe, president of the PIAJ.

Presently, a pension fund can hold a maximum of 10 per cent of its assets in allowable foreign currency assets. However, the PIAJ will advocate for this limit to be increased to 20 per cent, particularly given the reduction in foreign exchange volatility in recent years, the record amount of foreign exchange reserves, and the reduction of the country’s debt to gross domestic product (GDP). Jamaica’s net international reserves at the end of May 2024 stood at US$5,034.9 million, which can pay for over 37 weeks of the island’s import needs. Over the last decade, the GOJ has reduced the country’s debt-to-GDP ratio from above 150 per cent to approximately 72 per cent.

pension[ (l-r) Sanya Goffe, president of the Pension Industry Association of Jamaica (PIAJ) makes a point to Mr Richard Byles, Governor of the Bank of Jamaica and Lisa Soares Lewis, PIAJ Director, during the PIAJ’s Annual Luncheon held at the Jamaica Pegasus Hotel on June 6, 2024. Governor Richard Byles who was guest speaker at the event delivered his presentation under the theme ‘Navigating Financial Terrain: FX Limits, Interest Rates and Pension Sustainability’. ]

The PIAJ president stated that Finance Minister Dr Nigel Clarke has given the green light to start the process of implementing the PIAJ’s automatic enrollment proposal into law. She shared these recent developments during the annual PIAJ luncheon held at the Jamaica Pegasus Hotel earlier in June. Richard Byles, governor of the Bank of Jamaica (BOJ) outlined the Central Bank’s intent to establish a central digital depository for know-your-customer (KYC) information.

“We will be working with the banks to make sure that the standard of the information we get is excellent such that all banks will accept the information that is stored in the EKYC. The World Bank is working with us on it,” Byles said at the luncheon. Each year, the PIAJ hosts its annual luncheon, which brings stakeholders together to strengthen the industry through knowledge sharing and thought leadership.

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