Barbadians have literally lost their incentive to save for their golden years.
Investment Director of Fortress Fund Manager Roger Cave reported today that Government’s decision two years ago to remove the tax allowances on retirement savings, had resulted in a significant decline in contributions toward such plans.
And despite serious lobbying efforts by companies who offer retirement saving plans (RSPs), he lamented that there has been no willingness on the part of Government to date to reverse its decision.
It was back in June 2015 that Minister of Finance Chris Sinckler announced that Government was removing tax allowances on pension plans.
Immediately Cave had come out strongly against the measure, saying it was basically “a double taxation on pension schemes”.
Today during ‘a lunch and learn session’ at the company’s Hinks Street, Bridgetown office, Cave maintained that position, while stressing that Government’s policy had only served to hinder Barbadians from saving more for their retirement years.
“That has certainly reduced the levels of people investing in RSPs because the tax incentive has been removed. So in effect it has resulted in double taxation because the tax on when people withdraw from the RSP, has not been altered. So in effect you are not getting a reduction for putting money into the plan, but you are going to be taxed on it when you do retire. So that has significantly reduced contributions into those plans,” he said.
However, Cave said it was mostly the individual plans that had suffered and not the employer-sponsored plans, which he said had not changed that much.
“But it really is a policy that needs to be revisited,” Cave insisted.
“We certainly would like to see that go back to where it was particularly for pensions. Pension savings is something that needs to be encouraged, and more so rather than less so,” he added.
Pointing out that taxes had since increased and the cost of living had also gone up, Cave said people needed to be encouraged to save for retirement, which amounts to a sacrifice.
“And if there is not an incentive to doing it, people often just don’t bother. They will end up suffering because you cannot gain back the years that you have lost by putting away those savings,” he said.
However, Cave said Barbadians were generally still interested in other long-term investment options, adding that he would still encourage residents to invest in pension plans.
He reported that since the removal of the 2.5 minimum interest rate on deposit by the Central Bank in April 2015, Fortress has been witnessing an increase in the number of people seeking long-term investments and higher returns.
This, however, had led to the company putting a pause on those coming to do lump sum investments, since there was more money to invest than actual opportunities for those investments.