The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The over-$60 million public sector pension obligation will grow faster than inflation in the near term, it was revealed yesterday, and “will impose an increasing burden” on the Government’s finances without major reform.

Michael Halkitis, minister of state for finance, said the rapidly-growing public sector pension burden “must be addressed sooner rather than later” if it was not to add to the Bahamas’ fiscal woes.

Opening the 2013-2014 Budget debate in the House of Assembly, Mr Halkitis effectively conceded that civil service pensions were unfunded, meaning that no specific provision has been set aside to finance them.

This has resulted, he added, in a “pay-as-you-go” system where public service pensions are financed by amounts set aside in the Budget every year.

And, much like BEC, civil servants (beneficiaries) contribute nothing to their pension plans, meaning that the burden falls 100 per cent on the Bahamian taxpayer.

Tribune Business has written numerous articles over the years warning the Government that it needs to tackle the ticking public sector pension ‘timebomb’, and it now appears the Christie administration is preparing to tackle it.

Mr Halkitis told the House of Assembly that the Ministry of Finance had hired a company, believed to be the accounting firm, KPMG, to compile a report on public sector pension reform.

Referring to the current state of affairs, the Minister said: “We believe the current system of pay-as-you-go pensions will impose an increasing burden on the public purse.

“In this year’s Budget, the allocation to pensions and gratuities of public officers is in excess of $60 million, and this amount is expected to grow at a rate faster than inflation in the medium-term.”

Mr Halkitis said that apart from dealing with the inexorable increase in the Government’s pension obligations, the administration wanted to also protect the benefits of current workers and improve coverage, “as there are significant numbers of persons employed by the Government who are not pensionable”.

He added that consultation within the public sector would take place before the reform options were determined, with pensions “a major issue that must be addressed sooner rather than later”.