Annual review crucial

While the requirement of the Occupational Pension Benefits Act (OPBA) for the establishment of a Statement of Investment Policies and Goals has protection mechanisms in place, there is still a need for an annual review as this assists with accountability.

This is coming from Kester Guy of the Financial Services Commission (FSC), who delivered remarks at the Eckler Investment Conference, under the theme “Investment Policy Review for Pension Plans’, at the Lloyd Erskine Sandiford Centre (LESC), yesterday.

“As I reflect on the requirement of the OPBA for the establishment of a Statement of Investment Policies and Goals, I can clearly see the prudential protections that are enshrined therein. The need for annual review ensures appropriate engagement with the plan administrators, which secures an accountability framework. These two pillars – prudential criteria and reporting edification and accountability criteria – are critical elements within any robust regulatory structure.”

He said that given the financial environment that this island is currently in, there is an increasing apprehension about opportunities for investment and this only leads to greater threats to pension plans, said Guy.

“We are all aware of the weak economic conditions that face Barbados and many jurisdictions. Added to that, the growing concerns about reliable investment options, particularly in a narrow or undiversified environment creates further risks to pension plans… Notwithstanding, the regulator observes common exposures and notes that the impact of any shock may be exacerbated. Likewise, contagion effects arising from other sectors has the potential to significantly erode or undermine plan solvency.”

This is why it is imperative that as stakeholders in the financial services sector review their statement of investment policies and goals (SIP&G), that they clarify any questions that they may have as this would ensure that the pension plans that they develop would not be under any risk of underperformance, he said.

“As you actively review your SIP&G, raise all of your concerns with your advisors. Seek clarity on the economic environment and investment options and the associated risks. These matters are important to ensure that necessary adjustments are made to your strategy, in an effort to minimise underperformance of plans and the resultant funding gap in some instances.” (PJT)