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Pension Matters: Investing in the Future

Determining the right pension plan for your business

Experts estimate that we will need to replace at least 75 per cent of our pre-retirement income to maintain our current standard of living when we stop working. Participating in a pension plan is one of the most secure ways to achieve this, by investing now for future needs.

Despite this, the Jamaican workforce is significantly underrepresented in the pension industry, with just 11 per cent of the working population currently enrolled in a formal pension arrangement.

As an employer, you no doubt have an inherent interest in your employees’ welfare and in particular, their financial security upon retirement, after years of dedicated service to your business. Providing the option of a secure pension scheme will not only aid the motivation and productivity of your existing team, but will also put you in a position to attract and keep valuable and talented employees.

But how do you know what is the best fit for your organisation?

In establishing a company-sponsored plan, an employer will need to determine the rules which will govern the benefits that are to be paid to the beneficiaries of the plan. As the Sponsor, you will need to determine the type of plan that you will be putting in place for your employees.

You could implement a Defined Benefit plan which sets out a specific benefit that will be paid to the retiree based on a formula that takes into account the number of years an employee has worked and their salary. In this case, the Sponsor bears the risk of funding the benefit that has been promised.

Alternatively, you may set up a Defined Contribution plan. In this plan, employees contribute a portion of their income to a pension scheme, which can be supplemented by defined contributions by the employer. These contribution are invested to provide retirement benefits for employees.

The Approved Retirement Scheme (ARS)

The other option for consideration is to have your employees participate in an Approved Retirement Scheme (ARS).

An ARS is for self-employed persons, contract employees or persons who do not qualify to participate in their company-sponsored plan. With a benefit structure similar to that of the defined contribution plan, ARS is a good alternative to establishing a company- sponsored plan, while offering the same tax benefits.

As the employer, you may decide on the rate of contribution which you will pay for your employees, if any, and pay these along with the employees’ contributions each month over to the Financial Institution managing the selected ARS.

Taking the time to consult with a reputable pension provider can help you determine the best option for your business and your employees. Regardless of the plan you choose, the goal is to assure your team of your commitment to their present, as well as their future happiness.


Whatever your employee’s definition of retirement – traveling, volunteering, spending quality time with family and friends – the most important thing is to have a plan in place that secures their future peace of mind. Helping them to start that plan early will undoubtedly prove beneficial for all parties.

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