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Minister: Pension System Reform Critical 

By Julien Neaves,  Trinidadexpress.com

Trinidad and Tobago

March 28, 2008

Pension system reform and financial sector reform are critically important to transforming the local economy from oil and gas dependency to being broadly diversified, says Finance Minister Karen Nunez-Tesheira. 

She pointed out that pension plans which are well funded, organised and efficiently administered can offer economy-wide advantages. 

"They can be used to develop new financial institutions and deepen capital markets by mobilising long-term saving and allocating it to the productive uses," she said while speaking at a cocktail reception hosted by international consulting firms Mercer and Oliver Wyman at the Hyatt Regency Trinidad in Port of Spain on Wednesday. 

Nunez-Tesheira said that the range of investment opportunities for pension funds registered in this country was relatively limited, in relation to the quantum of assets available for investment. 

She explained that there were a number of restrictions in the Insurance Act of 1980, that specifies that a minimum of 80 per cent of assets of pension funds must be invested locally, and investments are further restricted mostly to equities, real estate, certificates of deposit and mortgages. 

"These quantitative restrictions have led to a significant concentration of pension fund investment in Trinidad and Tobago, and have limited the ability of pension funds to reduce local market risks through international diversification," she added. 

Nunez-Tesheira explained that the features of the reformed pension regime would address issues such as: 

- consolidating and modernising of the various pieces of dated legislation; 
- integrated regulation and supervision of the industry; 
- Establishment of minimum requirements/benchmarks governing the operations of the industry; 
- Establishing, in consultation with the industry and relevant stakeholders, core principles including indexation of benefits and contributions, and minimum income replacement ratios; 
- Policy recommendations for the pension industry in the White Paper on the reform of the Financial System in Trinidad and Tobago. 

Senate President Danny Montano and Minister in the Ministry of Finance Mariano Browne, together with lawyers, economists and members of the business community were also among those in attendance at the reception.

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