Regulations coming to increase investment limit

Durrant Pate/Contributor

The Government is moving to free up billions of dollars in investment by the island’s pension funds, which are being held up by regulatory limits imposed on these financial entities on the level of investments in private companies and foreign assets.

At present, pension funds face a 5 per cent limit of total assets for investment in the equity of private companies. This constraint has materially limited the ability of pension schemes to participate in local corporate and infrastructure financing.

Delivering her Budget Debate presentation a short while ago, Finance Minister, Fayval Williams announced that beginning in the new fiscal year, the administration will begin a process of increasing the percentage of their pension funds’ assets so they can invest in the equity of private companies. 

Increasing pension funds investment limit

The government is anticipating that together with the FSC, it can take a small but consequential step to increase the pension fund private asset limit from 5% of total assets to 7.5% of total assets. 

This, she told the House of Representatives, “represents a measured, reversible step to allow funds to begin reallocating to well‐governed private investments that match their long‐term liabilities. Subject to supervisory monitoring and in the absence of any unforeseen adverse consequences, we will complete the second phase of this increase to 10 per cent by April 2, 2027.”

She noted that at the end of September 2025,  pension funds held approximately J$847.0 billion in invested assets, of which roughly J$42.4 billion (based on the current 5 per cent limit) is available for investment in the equity of private companies. However, under the first phase of this change, an additional J$21.2 billion of long‐term capital will be allowed to be invested in private companies. 

However, this will be subject to supervisory monitoring and absent any unforeseen adverse developments. In the second phase, the government intends to raise the limit to 10 per cent by the beginning of the FY2027/28 fiscal year. 

“Madam Speaker, if we assume pension fund assets continue to grow at the recent rate of approximately 8 per cent, a further J$28.2 billion would be expected to become available for investments. Additionally, Madam Speaker, the Pensions industry that has been asking for completion of Phase 2 since I arrived at the Ministry of Finance and the Public Service. My commitment is to get Phase 2 done,” she told fellow Members of Parliament.

The Finance Minister admitted that had it not been for the intervening events of an election and a Category 5 Hurricane Melissa, the new regulations would have been tabled, pointing out that drafting instructions have already been sent to the Chief Parliamentary Council for drafting recently.

Limits on FX securities also being increased

As it regards Foreign Currency Denominated Securities issued by locally domiciled issuers, the government will be adjusting the limit. At present, pension funds and insurance companies face a 10 per cent limit for investment in foreign assets. 

By early in the new fiscal year, working with the FSC and the Bank of Jamaica (BOJ), the administration should be in a position to increase the foreign‐asset limit for pension funds and insurance companies from 10 per cent to 15 per cent of total assets. Together with the regulators, the administration will simplify the regulations for the assets they are allowed to hold.

The BOJ has advised that by June this year, it will make the adjustment to the limit and simplify the FX regulations. The additional 5 percentage points will be restricted to foreign currency denominated securities issued by locally domiciled issuers. 

This targeted change, Minister Williams argued, to a large extent, preserves overall caps on external exposure while enabling pension schemes to enhance their currency management and invest in high‐quality local dollar instruments that support domestic finance.