The Tribune

By NATARIO McKENZIE

Tribune Business 
Reporter

nmckenzie@tribunemedia.net

The Government’s unfunded civil service pension liabilities were yesterday described by the Bahamas Chamber of Commerce and Employers Confederation’s (BCCEC) newly-appointed chairman as a “ticking time bomb” that must be addressed in the short-term.

Gowon Bowe warned that the Government did not want to face a situation where it was ultimately paying more for retirees than current employees.

The PricewaterhouseCoopers (PwC) Bahamas partner urged the Government to carefully look at developing pension plans to ensure retiree needs are not based on fiscal success.

Mr Bowe, who was a speaker at CFAL’s retirement planning seminar, said: “The actuarial reviews that they have concluded are really saying that we have well in excess of a billion dollars in terms of pension deficit for the actual civil service.

“When you think about that with already having a five billion debt, that is an actual debt.

“Right now the Government is paying that out of recurrent expenditure.

“On our payroll is not only persons who are working but persons who are not working as well.

“That’s not to say it is not an obligation, but the Government really needs to look more carefully at starting to develop pension plans so that the dependence of their retirees is not on the success of Government’s fiscal affairs at the time that the monies become due.”

The KPMG accounting firm earlier this year warned that the Government’s unfunded public sector pension liabilities will hit $4.1 billion by 2032 without proper reform, 
describing this as “unsustainable” and akin to “the iceberg that sank the Titanic”.

KPMG, in its analysis of the 2014-2015 Budget, said the existing $1.5 billion liability associated with unfunded civil service pensions was set to increase by a further $1 billion within the next eight years if the status quo remained unchanged.

With no formal pension fund supporting civil service workers in their retirement, KPMG revealed that the Government is currently covering these costs by paying out $60 million from its recurrent expenditure annually.

And, with another $25 million in staff gratuities having to be completely covered by the Bahamian taxpayer, KPMG said this collective $85 million liability was projected to increase by 64.7 per cent within eight years - hitting $140 million per year come 2022.

Mr Bowe added: “In most developed countries where there is pension legislation that is actually a requirement and there are certain ceilings and floors where a company can not use pension assets in order to help the companies’ own fiscal performance.

“In our case, the Government is using persons’ pensions entitlement to fund today.

“And that is going to be a big element where they need to start to put monies aside, where this ticking time bomb is not one that runs up on them where you end up paying more for retired persons than you do for people on staff.

“That’s a real concern that we have to address in the near term.

“That certainly is one that can be done piecemeal.”

Mr Bowe noted that across the world, governments have defaulted on pension obligations.

“Even from a civil service perspective I wouldn’t want the government to be relying on future revenues,” said Mr Bowe.

State Minister for Finance Michael Halkitis said earlier this year that the Government had appointed committees to study reports on the state of its pension obligations and to begin to formulate options for reform.