Mar 2007 Financial News

Pension plans can put more in stock market

Mar 23, 2007

In an effort to revive T&T’s faltering stock market, Government has decided to increase the amount pension plan providers can invest in equity holdings from 50 per cent to 70 per cent of their total assets.

Minister in the Ministry of Finance Conrad Enill unveiled the plan yesterday during the post-Cabinet news conference held at Whitehall, Port-of-Spain.

Enill did not anticipate any shocks to the local stock market as a result of the new proposal and noted that the move will make $1.5 billion from these funds available for equity investment.

In the short term (for equity investments) you would have dips but in the longer term it would be trending upwards,” he said. “This proposal simply reflects the reality of that investment profile. Remember this is a pension fund.”

Enill cited a study performed by the Government and the Central Bank.

The study looked at the 37 funds which account for 85 per cent of the total equity investment of pension funds.

Enill said a previous Government exercise showed that “as a consequence of pension funds having to write their business down, $700 million was taken off the market.”

He said there would be rules requiring pension funds to have investment managers and plans.

From the study, Enill said some plans were not operating in the expected manner.

A pension plan and pension fund is a fund that has significant long-term maturities and there are very specific rules by which these funds must operate,” he warned.

Enill also laid down the guidelines to pension fund administrators.

He said there were now mechanisms to deal with any abuse of laws governing pension funds.

All plans with a surplus of 50 per cent or less of pension liabilities remain subject to the current rules,” he said. “Plans with a funding ratio in excess of 150 per cent will be allowed to invest in equities beyond the 50 per cent limit.”

The legislation is now before the Chief Parliamentary Council who are drafting it for parliamentary debate. With the advent of the Caricom Single Market, Enill also noted that Government was looking at cross-listing with other Caribbean markets.

Sherwin Long
The Trinidad Guardian
Friday, March 23, 2007.
http://www.guardian.co.tt/business4.html