For years the current fully funded public pension programme has been described as an albatross around the neck of government as it was always explained that for some time now the actual amount required to maintain pensioners far surpasses the annually budgeted figure. However, the gravity of the situation was not fully explained until it was mentioned in reports from the Auditor General, the most recent being the 2015 Report tabled in the House of Assembly on 13 December.
While presenting the 2018 budget estimates Premier Smith did not specify how much is allocated to pensions for the year, instead he announced that 13.5 percent of the budget was earmarked for the Pensions, Public Debt and Funds Contribution.
However, the Auditor General, Sonia Webster in sounding an alarm on the matter stated that the present funding method is a mammoth unsustainable undertaking by government.
In the 2015 report the matter of pensions was listed as Audit Issue 10 and the Auditor General explained that the government supports a fully funded pension system for qualifying public servants and legislators. However, she noted that the concerning factor is that over a ten-year period pension and gratuities payments have more than doubled from $7.6M in 2005 to $16.5 million in 2015.
“Currently the government’s pension obligation far exceeds the balance held in its Pension Fund of $1.05 million,” Webster announced.
Nonetheless, the Auditor General explained that an actuarial assessment is required to facilitate the introduction of adequate provisions to support this liability. “This requirement is especially relevant pending the implementation of IPSAS standards, which require pension obligation to be disclosed as liabilities in public sector financial reporting.”
The Auditor General previously bemoaned the pension obligations of Government in her 2013 report stating that at that time pensions and gratuities payments more than doubled from $6.7 million in 2003 to $14.3 million in 2013.
The situation of the exorbitant pension contribution was brought up in the 2018 Standing Finance Committee deliberations as Director, Human Resources, Michelle Donovan-Stevens noted that there continues to be an increase in the cost of pensions and that the number of retirees had gone up as well.
Donovan-Stevens said that in 2017 a total of 73 persons retired by 31 December 2017, with that number being the highest within the past five years. In fact, it was noted that since the hurricanes there has been an influx of retirees.
Government Concerned About Pension
The government is not oblivious to the situation as in 2014 during the presentation of the estimates for that year Premier Smith stated that the unfunded pension liability being carried by Central Government is approaching a large amount, and he said that Government has a solemn responsibility to address this issue once and for all.
Hon. Smith stated that Government is currently examining ways in which to ensure that this ever growing problem is addressed. “We cannot continue to bury our heads in the sand and ignore this problem as other governments around the world have done and now are faced with the harsh and brutal reality that this topic will bring if not addressed early,” the Premier stated.
“Currently this is a problem that is getting bigger and bigger and becoming more difficult to address. Although we do not have a concrete solution at this time we expect to have one in the very near future,” he added.
Four years have gone by, the problem remains.