So we’ve covered why it’s important to invest in a pension plan. It makes good fi nancial sense. But how does it work? Funds are generally invested in low-risk vehicles—government bonds, real estate and fi xed income securities are a few examples. Since a pension is an extremely important part of income for most after the age of 65, a stable low risk strategy is preferred. In many countries government regulations prevent pension managers from investing too heavily in stocks, foreign currency, emerging economies and new industries.

Now is a good time to discuss eligibility: pension schemes are offered by many medium to large companies, and oftentimes match an employee’s minimum contribution of 5 percent of salary. If already a member of such a scheme then you cannot also open an IRA. If however, you are a Jamaican resident between 18 and 68, self-employed, or working for a company that does not offer a pension plan, then you may open an IRA. But only one. At age 54 an IRA holder can take up to 25 percent of the value of their plan as a lump sum, the balance will be kept to fund annuity payments.

There are, of course, other IRA “need-to-knows”. According to Neilson Rose, Manager, Equity Trading and Asset Management at Mayberry Investments, “Plans allow for contributors to contribute a statutory minimum of 5 percent of their income, or up to a maximum of 20 percent of their salary. The pension, while being portable, is not refundable before retirement, of which there are four types; regular retirement (60 female, 65 males), early retirement (5 years before regular retirement), late retirement (5 years after regular retirement) and medical retirement. At retirement there are options as to how payments can be received.”

And here we get to the much more complex questions, of how to invest in an IRA and which one to choose? “The product offering at each institution varies,” says Rezworth Burchenson Managing Director, Prime Asset Management. “With Sagicor and Prime Asset Management, portfolio options depend on your risk profi le and age. However, Prime offers a customized solution of low risk Triple A (AAA) Portfolios, already packaged considering the needs of the investing public.”

There are at least six companies that currently offer IRAs in the Jamaican market, and the Financial Services Commission has said that it has other applications to offer the service, under review.

>THE OPTIONS<

PRIME ASSET MANAGEMENT
Prime Asset has been planning and administering pension schemes for 13 years and has returned positive returns on each one of them.
The company is strictly a pensions house, which means its focus isn’t divided between pensions and other investment programmes.