Spotlight on pension funds

THE spotlight was placed on pension funds and the impact of the COVID-19 pandemic on the local pension fund sector, as Eckler Ltd. hosted its annual Pension Investment Conference on Wednesday.

The virtual conference, designed to attract participants who are the trustees of many of the pension plans in Barbados, as well as chief financial officers and human resource managers of many of these companies, was opened by the Governor of the Central Bank of Barbados, Cleviston Haynes.

“I welcome this opportunity to address your Annual Pension Investment Conference. I commend Eckler on this initiative, particularly at this time when there is a dearth of new high yielding fixed-income investment instruments on the local market and investment managers are being challenged to find investment opportunities that balance yield, safety and liquidity,” Haynes remarked in his opening address.

“Over time, the local pension fund sector has become a significant, but perhaps underestimated segment of Barbados’ financial system. It serves as an important element of the safety net, mobilising the savings of employees which are deployed into investments that translate into increased economic activity,” he added.

Haynes revealed that at December 2019, pension funds registered with the Financial Services Commission reported assets of $2.3 billion and accounted for approximately 9.5% of all financial sector assets. He did point out that asset diversification limited the impact of Government’s fiscal consolidation efforts on the pension funds industry. He also noted that the sector did suffer some accounting losses, as most of its direct exposure to the Government of Barbados’ restructured securities is now embedded in instruments that now have a life of 35 years, compared to the traditional maximum life of 20 years.

Haynes went on to state that the debt restructuring represents an integral part of the reforms introduced by Government since mid-2018, to stabilise the public finances and create a platform for sustainable growth.

“The progress of these reforms has been encouraging, but we have not yet returned to a situation where new domestic long-term instruments are readily available for investors,” the Governor acknowledged.

He meanwhile noted that restoring vibrant activity on the domestic bond market remains a critical indicator that domestic investor confidence has returned and the pension funds industry has a role to play in this revival.

“I note that some pension funds have taken up some of the BOSS bonds on offer, but the trading of restructured securities by pension funds and other investors on the secondary market, remains limited. The growth of the pensions sector ultimately hinges on the fortunes of the wider economy, for it is successful businesses that will be best placed to establish and maintain pension funds for their employees,” the Central Bank Governor said, before delving into the economic impact of COVID-19 on Barbados generally. (RSM)