The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Public sector trade unions are “fleecing and bankrupting the country” via unsustainable non-contributory pension schemes, a well-known businessman said yesterday, noting that Bahamas Electricity Corporation (BEC) staff were earning benefits that exceeded 25 per cent of salaries.

Dionisio D’Aguilar, who was a BEC Board member under the former Ingraham administration, told Tribune Business it was “absolutely critical” that the Government tackle pension reform throughout the public sector, including all its various agencies and Corporations.

The Christie administration pledged to do just that in its Mid-Year Budget address, focusing first on whether it can reduce the administrative and actuarial costs associated with such plans.

However, Mr D’Aguilar said it needed to tackle the non-contributory, defined benefit pension plans prevalent within many parts of the public sector, as these were unsustainable and could not be afforded any longer by a cash-strapped government.

Non-contributory pension plans are paid 100 per cent by the employer/sponsor, with the employee paying nothing, and the Superwash president urged the Government to “correct this anomaly”.

Warning that major pension plan reforms would likely spark heated protests from public sector workers and their trade unions, Mr D’Aguilar urged the Government to “stay the course”, and added: “Don’t get wimpy on me.”

“You’ll have the unions screaming, the civil servants up in arms, but you’ve got to stay the course,” he advised the Christie administration.

“It’s absolutely critical that you have these pension reforms. These unions are fleecing the country. It’s completely out of hand. The costs of these pension plans are bankrupting the country.”

As an example, he pointed to the financially-struggling BEC, which “doesn’t have the money” to fund its defined benefit Bahamas Electricity Corporation Employees Pension Plan.

This scheme, a non-contributory/defined benefit scheme, is 100 per cent funded by BEC, which pays into the plan annually a sum equivalent to 13 per cent of the employee’s salary.

Mr D’Aguilar said the total benefits package for BEC staff was “in excess of 25 per cent” of their annual basic salaries, yet the workers were not contributing $1 towards this.

Despite the Corporation’s contributions, BEC’s accounts for its 2010 financial year showed that the pension fund had an unfunded liability/deficit of $31.11 million. This represented an increase upon the $26.54 million and $22.829 million deficits for 2009 and 2008, respectively.

And, in addition, at end-September 2010 BEC’s pension plan had some $221.357 million in obligations to beneficiaries, yet plan assets were worth just $150.959 million.

“They are slowly bankrupting the country,” Mr D’Aguilar said of such pension schemes, and the politicians have not taken this issue on head-on because it’s messy, but they have to address it or we will go bankrupt.

“They have to tell the unions that they could afford it 10 years ago, but not now. They’re tackling the deficit. It’s commendable, it’s praiseworthy, but they need to correct this anomaly in the country.

“These are tough decisions. We’ll have everyone marching up and down the place, but we can’t sustain it. It’s enough. Let them march, hit the streets, then move on.

“We’ve got to let them get it out of their system, but cannot afford to pay them any more. They [public sector workers] have to contribute to their own pensions.”

Mr D’Aguilar backed comments made to Tribune Business earlier this week by leading Bahamian accountant John Bain, who warned that the days of non-contributory pensions “are over”.

“Going forward, that’s not going to happen any more. The people in those plans now will stay. I’m on the Board of the Water & Sewerage Corporation, and we have decided that if you’re on the plan now, you will stay on it, but all new employees will have to join a contributory plan,” Mr Bain said on Monday.

“You pay some, we pay some. Those days are over, the 1960s and 1970s. If you want a pension, you have to pay something towards it.”

Mr Bain called on this nation not to let total employment costs “get out of hand”, adding: “Government employees can enjoy benefits that may increase the payments made to employees anywhere from 18 per cent to as much as 27-30 per cent, depending on their levels in the Government, the amount of training and travel, and the associated benefits, including non-contributory pension costs.”

Meanwhile, noting that politicians often became scared when confronted with union militancy and pressure, Mr D’Aguilar urged the Government: “Don’t get wimpy on me.

“Do what’s in the best interests of the country, not what’s in the best interests of a select group of citizens.”