The Tribune

A Bahamas-based investment banker yesterday bemoaned the absence of “real will” to drive wide-ranging pension reform, with the government paying “lip service” to its own liabilities.

Michael Anderson, Royal Fidelity Merchant Bank & Trust’s president, speaking at the bank’s “Pension Breakfast”, described the government’s multi-billion dollar unfunded pension liabilities as a “catastrophe” and “crisis”.

“I think we tend to pay lip service to it and we have done for a while,” he said. “That issue is growing, and growing behind us. We try to solve today’s problem and we think that the pension issue is tomorrow’s problem.

“The taxpayer ends up paying for that problem at some stage. The earlier we start to recognise and deal with it, the better. We just watched Barbados go through a financial crisis and these are all parts of the financial crisis. We need to solve the pension issue just like we solve other issues.”

The International Monetary Fund (IMF) has warned that the current system - where civil servants contribute nothing to funding their retirement - is “unsustainable”, noting that accrued government pension liabilities totalled $1.5 billion in 2012, and would rise to $3.7 billion by 2030 as the population ages unless corrective action is taken.

The IMF said: “Government employees draw pensions at retirement without contributing to the system while employed. Staff analysis in the 2016 Article IV Staff report noted that accrued government pension liabilities totaled $1.5 billion in 2012, and would rise to $3.7 billion by 2030 as the population ages.”

The IMF called for reforms that involve “moving to a contributory regime in the near term, and to a defined-contribution scheme in the medium-term”. This would require civil servants to contribute a portion of their salary to funding their retirement, rather than having this financed 100 per cent by the taxpayer through the Budget - as is done currently.

Prime Minister Dr Hubert Minnis during his 2018]-2019 budget address that civil service pensions will become contributory for new hires, with a commencement date to be announced. However, this does not address the underlying liabilities, with the Government committing $100 million of taxpayer monies to funding its retirees in the upcoming fiscal year.

Mr Anderson yesterday said the Bahamas cannot further delay addressing the need for pension reform. “I don’t think there is yet the will to address it in any serious sense. We’re dealing with crisis today; the ones we can see,” he explained.

“VAT is solving a financial problem we have. When we do that we’re kicking pensions down the road. I don’t think we have yet got any real fundamental will at the government level to deal with it. I am hoping we can sit down with government over the next year and start working with them to start and put some plans in place. I don’t think we’re there yet.”