The Tribune

By YOURI KEMP

Tribune Business Reporter

ykemp@tribunemedia.net

The Bahamas needs to avoid a Greek-style pension collapse and instead move ahead with the reform of the public pensions scheme as soon as possible, says the chief operating officer of CG Atlantic Pensions, Larry Gibson.

Mr Gibson, in response to the International Monetary Fund’s dire warning on the possibility of the elderly not getting their pensions in a few years, told Tribune Business: “I think it was PwC that did a study and what it says was by 2040 or 2050, basically this system would be insolvent.”

He added: “Now what it happening is that the rate of growth in liabilities for unfunded pension- pensions are pay as you go now- and that means you work for government, when you retire, we pay your pension out of the general revenues.

“In the private sector, you have a system of what they call funded pensions where you set up a structure, typically a trust, and you pay contributions into the trust.”

Previous research by the KPMG accounting firm projected that these unfunded liabilities will likely be around $2bn at this stage which, when added to the national debt, would take it well over $12bn by end-June 2022. Another 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.

Mr Gibson also asserted that there could be a situation where the elderly would not be able to receive their pensions after a while as the IMF states. “If you take what is happening in most recent times in Greece, where the government just couldn’t afford it and Greece was in the same position as we were in and what they had to do was they had to pay partial amounts on it. They were not able to live up to the promise that is happening in many other countries.”

Michael Halkitis, Minister for Economic Affairs, speaking to reporters ahead of the weekly cabinet meeting said it is the government’s intention to continue on with pension reform for the public service, an initiative that goes back as far as the last Perry Christie Progressive Liberal Party administration.

Mr Halkitis said: “Back in the administration of between 2012 and 2017, we actually commissioned a study on the extent of the liability on options of what we can do. At that point, we actually got to the point of discussions with the public sector unions as to what would be a scheme that would be amenable to them. We didn’t get to complete that.”

The ensuing Hubert Minnis Free National Movement administration also made attempts at pension reform but did not get very far with the initiative.

Mr Halkitis added: “But we think we have come up with a possible solution to deal with that. It is an issue that again, you have to take steps now and you will see the benefit of it in 30 years in terms of the creation of a fund and the building up of that fund. But it’s one of those things that has been constantly kicked down the road.

“You would have heard the Minister of Public Service speak about it. I might have spoken about it. It’s something that we’re committed to and hopefully we can get that started within this fiscal year. That’s our goal.”