Barbadians to Benefit from New Pension Solution
BARBADIANS HAVE a new choice for earning a pension in retirement. This comes following the introduction of a retirement option, which provides an alternative to a traditional annuity by Fortress Fund Managers at a recently concluded pension seminar. René Delmas, the company’s pension director, explained to the audience of Human Resource, Finance and other senior executives that the pension landscape was changing and new options were necessary.
According to Delmas an estimated one fifth of Barbadian workers have group pension plans. This means the other 80% of workers may only have the pension provided through the National Insurance Scheme and/or their personal savings, if any. He explained that this would probably not be enough to maintain their lifestyle after retirement, adding that retirement planning is a long-term project, lasting 50 years or more.
Previously, a DC pension plan member or Registered Retirement Savings Plan (RRSP) holder had to cash out of their long-standing investments and buy a fixed rate annuity at retirement. This locked in a fixed monthly payment for life. Delmas explained that inflation can eat away at this fixed payment over the years, causing its real purchasing power to decline to a fraction of where it started.
The concept behind the policy is two-fold. First it presents retirees with the previously unavailable opportunity to retain control over the capital they have built up over the years and secondly, it equips retirees with a better chance of earning a return high enough for their pension income to keep up with inflation as the years progress. They can still purchase a fixed rate annuity at any time if they wish, but they no longer need to do so immediately at retirement – or ever.