The Tribune

By YOURI KEMP

Tribune Business Reporter

ykemp@tribunemedia.net

The Government was yesterday said to have hired KPMG to analyse how the Government should best structure a contributory pension scheme for new civil service hires.

Pia Glover-Rolle, minister of state for the public service, told the Office of the Prime Minister’s weekly media briefing that the accounting firm will develop recommended contribution rates and other conditions for a scheme that will see new civil servants - for the first time in Bahamian history - contribute towards their pensions and retirement upkeep.

She said: “Any persons that would be engaged - and remember I said we aren’t hiring generally at this time - but any new hires going forward, when we do commence our hiring process, will be considered for a contributory pension.

“The sustainability of the pension plan in its current form cannot take on the burden of new pensioners. That process has been under an analysis that has been going on for a while, dating back to probably four or five years.

“That analysis has brought us to this conclusion that we need to find a better way to sustain our pension fund with any new hires coming on board. So far, the analysis that has been done has been very promising. Persons understand that for the sustainability of the plan that there will have to be contributory pensions.”

Tribune Business reported earlier this week that the total public sector debt stock of $11.429bn is likely to be significantly higher because it does not incorporate the Government’s multi-billion dollar civil service pension liabilities.

Public officials currently contribute nothing to their retirement income, with the financing burden borne 100 percent by Bahamian taxpayers in the annual Budget. The Government presently funds these pensions via a “pay as you go” mechanism, with almost $125m dedicated to this issue in the 2021-2022 Budget.

The issue thus represents a potential millstone around the necks of future administrations and taxpayers. Previous research by KPMG, which was engaged by the last Christie administration to examine the issue, projected that these unfunded civil service pension liabilities will likely be around $2bn by now, which would take the total debt stock to well over $13bn.

“The civil servants’ pension system is unsustainable,” the IMF warned three years’ ago. “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 $1.5bn in 2012, and would rise to $3.7bn 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 percent by the taxpayer through the budget.

And a presentation delivered by KPMG in 2013, the early years of the last Christie administration, estimated the unfunded, “pay-as-you-go”, civil service pension liabilities at around $1.5bn. These liabilities were set to increase to $2.5bn by 2022, and $4.1bn by 2032, unless reforms were enacted - and this is still yet to happen.

Meanwhile, amid the public service hiring freeze, Mrs Glover-Rolle said an exercise will be held to make prior recruits permanent and pensionable. She added: “We realise with the amount of persons that need to be captured in this exercise that we will have a blanket exercise for that.

“So we are considering moving from 2016 backwards to capture those persons in the service that need to be permanent and pensionable. Of course, those that have adverse reports, we will have a special analysis of their files to make sure that we’re progressing with all of the best and the brightest and those that are able to move through the system well.”

Mrs Glover-Rolle said there is also a process to “disengage” the Government from unoccupied buildings that it pays rent on to the tune of $5m annually, she estimated.

She added: We do have a unit that is capable and competent, and that has an inspection officer who is currently going and reviewing buildings across the country.”

This review of public buildings “isn’t Nassau centric” and will be done throughout The Bahamas. “In some instances we have civil servants that are employed that are working in buildings that are not occupiable, and should not be occupied by persons expecting to do a good job at work,” Mrs Glover-Rolle said.