The Tribune

By Fay Simmons

Tribune Business Reporter

jsimmons@tribunemedia.net

A Cabinet minister yesterday confirmed that draft legislation for a new civil service pension plan will son be presented to the public sector unions to obtain their views and feedback.

Pia Glover-Rolle, minister of state for the public service, told the House of Assembly during the 2023-2024 Budget debate: “The Government, led by the Ministry of Finance, is exploring ways that a contributory pension plan can be feasibly introduced. The draft legislation will soon be presented to public sector unions for feedback.”

She explained that the benefits under the new pension plan, a defined contribution scheme that will require new civil service hires to contribute a portion of their income to fund their own retirement, will be improved compared to the existing pay-as-you-go provisions. Existing civil servants will still be entitled to benefits under their existing pensions and National Insurance Board (NIB) payments. However, if they opt in to the new plan they will be eligible for those benefits as well.

Ms Glover-Rolle said: “Ideally, the way this will work is that the benefits will be larger, on average, than those experienced under the existing plan, and will also be proportionate to the amount the public servant contributes.

“The more you contribute, the more you will receive. Existing public servants will still be entitled to their current pension plan, as well as NIB. They will be able to opt in to this plan so that when they retire they will receive NIB benefits, the existing pension plan benefits, as well as the expanded benefits from the contributory pension plan.”

Ms Glover-Rolle added new public servants will be brought on under the new pension plan, which is designed to be portable. She said: “New public servants will be streamlined into the contributory pension plan, which will provide better benefits in a financially sustainable way for the beneficiary, as well as the Government.

“The plan is also intended to be portable. This means that if someone starts their career with the Government but then decides to explore private sector opportunities, they can take the plan with them and even begin to contribute more so that they can receive more benefits upon retirement.”

Simon Wilson, the Ministry of Finance's financial secretary, previously voiced optimism to Tribune Business that legislation to reform public service pensions - including moving all new civil service hires to a defined contribution scheme, where they will contribute to their own retirement savings - could be ready for presentation to Cabinet by September this year.

A new line item in the Ministry of Finance's 2023-2024 Budget is a $10m allocation for "employee pension contributions", and the financial secretary confirmed this sum is to cover the Government's share of payments on behalf of new hires as well as public sector workers "normally not covered" by a government pension such as weekly workers and local government staff.

"If we get the legislation passed this year, we will be in a position to start the defined contribution plan. That will be for new entrants," Mr Wilson added. "It's [the legislation] almost completed.

"We have to do some consultation with the public service unions. It's more so for new entrants, and persons normally not vested in a government pension plan. We have a number of government employees not participating; weekly workers, school Boards, livery services, worker for local government who are not normally pensionable.

"You have quite a few persons not normally pensionable. It's a challenge.. persons who work for 20, 25 and 30 years and get nothing when they leave. We have to get it finalised, drafted and consulted, and then it will be in a position to go to Cabinet hopefully by September this year. Hopefully."

The Government has long had its woes with unfunded civil service pension liabilities, which previous research by the KPMG accounting firm suggested would likely have reached $2bn by this stage without any reforms. Civil servants presently contribute nothing to their retirement, which are being funded by Bahamian taxpayers at the sum of $134.744m in the 2023-2024 Budget.

The IMF, in its Article IV report in 2018, agreed that the current system - where civil servants contribute nothing to funding their retirement - is “unsustainable”. And it called five years ago for “decisive measures.... to reduce debt”, singling out public sector pensions and health as two areas deserving close attention.

“The civil servants’ pension system is unsustainable,” the Fund warned. “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 per cent by the taxpayer through the Budget as is done currently.

Ms Glover Rolle, meanwhile, yesterday also revealed that a public service audit is nearing completion and that the digitisation of the public service will lower turnaround times.

She said: “A public service-wide audit is nearing completion, which will inform major recruitment and training efforts, as well as human resources policies moving forward.

“Digitisation efforts were initiated this year, and we are now moving full speed ahead with the digitisation of hundreds of thousands of files within the Ministry. When we are done, estimates indicate we should expect a significant boost in efficiency as we automate workflows and digitise files for quick and secure access. The end result will be faster processes for every area of public service.”

She added that this process will include a human resource management system that will ensure greater accountability.

Ms Glover-Rolle said: “Another phase of our digitisation efforts is the introduction of a human resources management information system that is being led by the Ministry of Finance, in tandem with the Ministry of Public Service. This system will allow for greater accountability.

"This system will allow for ease of access for employees accessing their files and human resource matters. Most importantly, this will allow for authentication and verification of employees across the public service.”