The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

An investment banker has cautioned Bahamians against using pension monies and retirement savings as emergency funding to ride out the COVID-19 pandemic.

Michael Anderson, pictured, RoyalFidelity Merchant Bank & Trust’s president, told Tribune Business it had begun to see “a lot of people take money out of pension plans” whose terms enabled them to do so.

While understanding the emergency situation facing many Bahamians, he warned that those doing so were effectively easing short-term pain at the expense of building up sufficient financing to enjoy a comfortable retirement that could last 20-30 years.

“We’re seeing people take money out of their pension savings to support themselves,” Mr Anderson confirmed to this newspaper. “We’ve seen people draw money out of their pension plans. We’ve started to see that with certain entities that allow people to take money out of their plans. Where they’re able to, we’ve seen a lot of people take money out.

“Our general view on this is: Let’s assume this [pandemic] is a six-month problem. When you retire you have a 20-30 year problem when you have no income coming in. You have to anticipate a much longer term shortage of revenue. This is definitely a short-term problem compared to retirement in that regard.”

However, the temptation for many Bahamians to access retirement/pension savings and other long-term funding sources is very real amid the growing financial stress inflicted by loss of jobs and incomes due to the COVID-19 lockdown and tourism industry closure.

Mr Anderson estimated that tourism and related industries likely “have to get through an almost six-month period” without any customers as the earliest visitors can be expected to return in significant volumes is likely the Thanksgiving holiday in November.

“The people most impacted are those in the hotel, restaurant and tourism industries,” he added. “Those people don’t have a lot of savings to start with, and a lot of them live week-to-week, month-to-month. Those persons are definitely hurting, and it’s what’s driving the unemployment lines.

“The tourism industry has been hurt worst by this, and that’s really where the Government’s aid and assistance is required at the moment. There’s a need to assist them for an extended period of time until the hotels and restaurants pick up. There’s nothing there to generate income for the next three to six months.

“There’s almost a six-month period until October we’ve got to get through with all these industries that are reliant on tourism. Most of the little savings people have will be depleted before then, which is why they’re so reliant on support.”

Mr Anderson said many businesses had also existed on a “month-to-month” basis, which was they temporarily laid-off staff so rapidly as they were unable to meet payroll with no revenue income coming in.

“Hopefully they’ll be able to keep themselves going until they generate revenue,” he added. “There is a local market that can hopefully get going by June so there’s some benefit for employers and employees getting back to business. It’s not the bulk of it by any means.

“For the local market to do well people need to have money, and the local market is not really making any money at the moment. It’s one of those where we have to wait for tourism to resume before we see any real volumes coming through hotels and restaurants. We have to bide our time and figure out how best to get through it.”

Mr Anderson said “there’s definitely two sides” to the pandemic fall-out, as those with assets to invest were still buying into RoyalFidelity’s mutual funds while “reasonable volumes” of activity were taking place on the Bahamas International Securities Exchange (BISX) among listed equities and other available securities.