By NATARIO McKENZIE
Tribune Business Reporter
THE Deputy Prime Minister yesterday said the Government was "looking very carefully" at how to defuse the ticking timebomb that is its $2.2 billion unfunded civil service pension liability.
K P Turnquest said the Minnis administration knew it had to make the situation "more sustainable", given the implications for the Government's finances and national debt.
He said: "We recognise that the pension liability is a significant consideration, and we are looking at ways to deal with it and manage it. We are still early in that process. I would say we are looking very carefully at the reforms we need to make to ensure that the Government pension system is more sustainable."
The International Monetary Fund (IMF) has warned that the Government's unfunded $2.2 billion pension liabilities are "a significant fiscal risk" that could undermine efforts to get the public finances back on a sustainable footing.
The Fund earlier this year said it was "inevitable" that the Government would have to reform both public sector pensions and the National Insurance Board (NIB) to defuse a potential social time bomb.
It warned that unless corrective action was taken, both schemes would become an unsustainable burden on the Bahamian taxpayer and society, with ageing populations and a reduced workforce exacerbating the problem.
"Pension payments have trended up to an estimated 1.1 per cent of GDP in fiscal year 2017, and population aging will increase them further," the IMF had warned. "Staff recommended transforming the civil servants' pension system into a contributory regime in the near term, with contributions commensurate with benefits, and with a view to move to a defined-contribution scheme in the medium term. Setting contributions at 5 per cent of wages for pensionable employees could yield revenues for 0.3 per cent of GDP."
The saving would be equivalent to $25.2 million per annum, based on an $8.4 billion GDP and the IMF's figures. The KPMG accounting firm previously estimated the unfunded, 'pay-as-you-go', civil service pension liabilities at around $1.5 billion. These liabilities are set to increase to $2.5 billion by 2022, and $4.1 billion by 2032, unless reforms are enacted.