Pension funds and the expanded foreign currency asset limit Jamaican pension funds have been given more room to invest in foreign currency assets. With effect from June 1, 2026, the Bank of Jamaica (BOJ) increased the foreign asset limit for pension funds from 10 per cent to 15 per cent of total assets. The increase has been welcomed by the pension industry and represents another step in a process of gradual liberalization which has seen the limit move from 5 per cent to 7.5 per cent, then 10 per cent and now 15 per cent.
Pension funds invest for the long term. In many cases, they are investing today for benefits which will not become payable for decades. Pension funds’ ability to diversify is therefore important. Jamaica has a relatively small capital market, and as pension assets have grown, funds have increasingly had to invest substantial sums within a limited domestic investment universe. Greater scope to hold foreign currency assets, including through access to international markets, allows funds to diversify risk across countries, sectors, currencies and asset classes. Without that access, the bulk of members’ retirement savings remains exposed to the fortunes of a single economy. The PIAJ’s concern is that the original investment and the income subsequently earned on it are quite different from a foreign exchange perspective. A pension fund that wants to purchase US$1 million of foreign securities may need to acquire the foreign currency to make that investment. That transaction can create demand in the domestic foreign exchange market. If that same US$1-million investment subsequently earns a US$50,000 coupon, the US$50,000 has been generated by an asset the fund already owns. No Jamaican dollars have been converted and no additional foreign currency has been purchased in Jamaica to generate that income.
If the income is retained in foreign currency or reinvested, the fund increases its foreign asset holdings, but without creating additional demand for foreign currency in Jamaica. If the income is converted into Jamaican dollars instead, it adds foreign currency to the local market.
The effect of counting both the original investment and the income it subsequently earns towards the 15 per cent limit is treating earned income in the same way as a fresh purchase of foreign assets.
Research undertaken by the PIAJ and reflected in its submissions to the BOJ examined the treatment of foreign investment income in Malaysia, Iceland, Ghana, Chile, and Botswana. No two regimes are identical. Across those jurisdictions, the regulatory focus has been on principal outflows rather than treating interest, coupons and dividends earned on existing holdings as new capital outflows. Malaysia and Iceland, for example, restricted capital movements while permitting income flows to continue. https://www.jamaicaobserver.com/2026/09/02/pension-funds-expanded-foreign-currency-asset-limit/
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Pension funds and the expanded foreign currency asset limit - Jamaica Observer
3September 2, 2026 789 1
