The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The prospects of improving the Bahamas’ dismal 21 per cent pension coverage ratio are “not very high” because proposed legislation does not make participation mandatory, a senior private sector official yesterday adding it was “not the right time” to bring the Bill forward.

Winston Rolle, the Bahamas Chamber of Commerce and Employers Confederation’s (BCCEC) chief executive, said the failure to mandate that all Bahamian workers be covered, and participate in, pension plans would defeat the purpose of the Government’s plans.

Government data seen by Tribune Business suggests that of the 191,000 persons in the Bahamian workforce, just 40,000 - about 21 per cent - are covered by a pension plan.

Most of these workers are likely to be in the Government corporations, such as BEC and BTC, plus the hotel sector. The low coverage ratio also underlines the ‘ticking timebomb’ facing the Bahamas in terms of its ageing population, and the burden this will create for future generations of working age, given the inadequate level of retirement savings - and low levels of savings/investments generally.

And Mr Rolle also questioned whether it was the right time for the Government to bring the Employees Pension Fund Protection Bill forward, given that any Bahamian companies were “still struggling”.

Requiring them to make employer contributions into a pension scheme would impose a further financial burden on firms at a time when they could least afford it, and Mr Rolle also suggested that more education was required so that Bahamians understood the importance of retirement saving and why they needed to contribute.

The Employees Pension Fund Protection Bill has already been tabled in the House of Assembly for its first reading, and draws upon much of the work performed by a Pensions Task Force appointed by the Ingraham administration.

“The concerns that we, like most people have, have to do with the fact that it [pension coverage] wasn’t mandatory, which meant the chances of success will not be very high,” Mr Rolle told Tribune Business.

He added that the BCCEC was also concerned about Section 35 of the Bill, which contains a ‘hardship withdrawal’ provision,

The fear here is that it defeats, and is counter-productive, to the whole purpose of a pension plan, as it will encourage Bahamians to continually dip into their retirement funds to cover daily expenses.

“People have access to their pension fund if they get into trouble with bills etc,” Mr Rolle said. “The concern was that the terms and conditions on how persons get access to those pension funds was not documented, as is typical with legislation.”

The BCCEC chief executive said the provision, as currently written, would encourage some to “go ahead and take some risks, as they know there’s the option down the road to access their pension fund”.

Mr Rolle said another BCCEC concern was that the Bill appears to establish another financial regulator in the shape of a standalone Pension Commission.

“The other things is that you’re creating more bureaucracy as well,” he told Tribune Business. “We’re already challenged with having too much government, and government that is not efficient,and now you’re creating a pension enforcer to regulate pensions.”

Tribune Business understands that the Task Force had recommended incorporating the functions of a Pensions Commission into either the Securities Commission or Insurance Commission. The ‘end game’ was to merge all these regulators into one, with a securities division, insurance division and pensions division.

Expressing further concerns, Mr Rolle told Tribune Business: “One of the major concerns about it is timing. There are a lot of businesses out there still struggling, and now you’re talking about adding pensions that will be contributed to by employers and employees.

“I just don’t see this as the right time to do so. There’s a lot of pressing issues that need to be addressed, rather than legislation on mandatory pensions.

“The question is why is it so important that it be introduced at a time like this. There’s nothing in there that mandates it, and nothing that mandates people put into it.

“If companies decided to participate, and it is not mandatory for everybody to do so, that leads to challenges with it being successful.”

While acknowledging that retirement savings and pensions were important, Mr Rolle said much more education was required to inform Bahamians on why the initiative mattered to them.