EDITORIAL: Address issues in public service pension plan
THE APPEAL BY Minister of Finance Chris Sinckler for public officers to defer early retirement requests and not act on rumours gives us cause for thought.
So serious is this situation that our legislators should discuss the sustainability of the existing pension plan for state employees during the current Estimates debate.
Public officers form the largest group of employees and the viability of their pension plan can have an economic impact on the wider society. Unfortunately, many Barbadians do not take significant interest in their retirement benefits until it is too late.
Many of them, from both public and private sectors, do not understand the full scope of their entitlements after retirement, and expectations are often greater than the reality.
This country’s civil servants are in a defined benefit plan and the established view and attitude of beneficiaries, past and present, is that the money is there, and always will be. After all, Government will not go bankrupt, it will not go out of business and there will be no merger or acquisition of its core business; so pension funds are not at risk.
But we see how unsubstantiated talk of the taxing of gratuities has created a level of fear amongst many public officers. They appreciate recent history, which shows that there are really no guarantees about any financial product and risks abound.
Auditor General Leigh Trotman has addressed the issue of the defined benefit plan in his latest report in which he highlighted the large unfunded pension liability on the part of Government, which is approximately $4.3 billion, following the 2014 actuarial review.
His comments and Mr Sinckler’s appeal suggest that there are key issues to be addressed.
The public, and not just civil servants, must be assured that the existing pension plan must be well managed and should address some key issues: that benefits are fair and predictable, and contributions are not only accounted for but also well funded. In this regard, the results of the latest actuarial review of the plan should be publicly discussed to state if any changes should be considered.
Pension reform is a must so as not to cause a national financial catastrophe, since it is clear that without changes to the prevailing defined benefits plan, the problem will only continue to grow.
The public sector must meet its commitment to retirees and participants already in the system. Going forward, the system must not only provide generous retirement benefits but also encourage greater control of personal retirement savings.
Barbados cannot allow a time bomb to be ticking away slowly – as it relates to the management of public sector pension funding – with the potential to undermine the country’s fiscal health.
The looming crisis will not disappear and we should not wait until it actually arrives. Doing nothing is not an option.