By NEIL HARTNELL
Tribune Business Editor
nhartnell@tribunemedia.net
A union chief yesterday backed workers contributing to their pensions, and slammed Bahamas Power & Light (BPL) for failing to address its $110 million pension deficit.
Paul Maynard, the Bahamas Electrical Workers Union’s (BEWU) president, told Tribune Business that its 2014 industrial agreement included a provision to address BPL’s growing pension liability by converting to a defined contribution plan.
He argued that BPL staff would have no problem doing this, and contributing to their retirement income from their own salaries, the union having recognised “20 years ago” that the Bahamas Electricity Corporation’s (BEC) defined benefit scheme was unsustainable.
However, Mr Maynard alleged that successive Boards and management teams had never implemented the pension reform provision contained in the industrial agreement, with the BPL managers’ union also securing a similar clause in their deal a year later.
“When I signed my contract in 2014, we made a deal for us to start a new pension; a contributory pension,” the BEWU president told this newspaper. “The management union signed the next year for the same thing.
“It was never enacted. We were full prepared to pay for the pension. We realised it was unsustainable 20 years ago.”
Mr Maynard said the industrial agreements called for the formation of a committee, featuring two BEC/BPL Board members; one person from management; a representative from the management union; and two from the BEWU.
He added that the committee was to “investigate the different type of pension” reform options open to BPL, and select the best one, but it was never formed.
“We were supposed to figure out how we were going to do this pension and implement it,” Mr Maynard said. “It was supposed to have been done; I kept asking for it, and got no answers.”
The union president said he raised the issue when PowerSecure took over as BPL’s manager in March 2016, adding that former chief executive, Pam Hill, gave instructions to form the committee “to deal with it”.
“That was one of PowerSecure’s pet peeves; that the pension plan was unsustainable long-term,” Mr Maynard told Tribune Business. “We understood that. The more you make, the harder it’s going to be for the company. It’s unsustainable if they keep paying for that.”
PowerSecure’s BPL business plan pegged the pension fund deficit at $110 million in 2015-2016. The last audited accounts for BEC, for the year to end-September 2014, showed a $107.981 million deficit, with plan assets of $160.886 million dwarfed by obligations worth $268.867 million.
PowerSecure’s strategy called for the $110 million pension deficit to be eliminated via the proposed $600 million Rate Reduction Bond (RRB) refinancing of BEC’s legacy debts and other liabilities. This refinancing, in whatever form, has yet to happen, meaning the pension deficit remains.
When asked why successive BEC/BPL Boards and management had failed to tackle the problem, despite the unions’ apparent willingness, Mr Maynard replied: “I don’t know. That’s a question you need to ask further up the chain.
“I’ve been asking and advocating for this. I had a meeting with my members, said this is what we’re going to do, and have been looking for it. For 20 years presidents before me have all asked to contribute, but were never allowed to do it. The unions aren’t monsters; we understand it’s not going to be sustainable if we don’t contribute.”
More broadly, Mr Maynard said he backed the idea of workers contributing to their retirement security by paying a portion of their salary into defined contribution plans.
“It’s time for all pension plans to go to contribution,” he told Tribune Business. “It’s a very good thing for that to happen. In the end, you get more [retirement income] so it’s beneficial to you.”
Some observers may be surprised at a Bahamian union leader’s willingness to call for workers to contribute to their own retirement savings, but Mr Maynard’s - and BPL’s - position on pensions hints at a broader problem for this nation.
Virtually all public sector corporation pension plans are suffering from multi-million dollar pension deficits such as BPL’s, representing potentially huge liabilities for the Government and Bahamian taxpayer.
In common with BPL’s, these are defined benefit pension plans, where 100 per cent of the contributions to staff retirement income comes from the company. BPL is contributing a sum equal to 13 per cent of employee salaries to its scheme, and yet the deficit continues to grow.
The Bahamas Telecommunications Company’s (BTC) pension fund deficit was $39 million when it was privatised in 2011, and former prime minister, Perry Christie, frequently lambasted the Ingraham administration for failing to provide the financing to cover this ‘hole’ as promised.
While that scheme was closed to new employees, and a new defined contribution plan created, Mr Christie said the original plan’s deficit had ballooned to $62 million in 2014, and then $99 million in 2016 - increasing the taxpayer liability.
More serious than the public corporations is the situation with civil service pensions, which are currently funded via a ‘pay-as-you-go’ type of arrangement in the annual Budget. The KPMG accounting firm previously disclosed that these liabilities, which it currently estimates at around $1.5 billion, are set to increase to $2.5 billion by 2022, and $4.1 billion by 2032, unless essential reforms are enacted.
These liabilities would push the national debt towards $8.5 billion if included in the calculation, a figure almost equivalent to total annual Bahamian economic output or a 100 per cent debt-to-GDP ratio.
As a result, calls are growing for pension plans to shift to the defined contribution model, where companies match employee contributions up to a certain percentage of their income, thus sharing the burden 50/50.
Mr Maynard, meanwhile, said the need to pay-off the pension deficit, refinance BEC’s other legacy liabilities and obtain $450 million in new financing had taken the electricity monopoly’s needs to over $1 billion.
Comments
sheeprunner12 6 years, 6 months ago
BPL, BEC, WSC, Bahamasair, ZNS etc. must be privatized and these liabilities cleared off before 2020 .......... then a phased-in civil service long term pension plan must be established to get ALL civil servants (who have less than 20 years' experience) off the present system ...... OR the government pension plan will crash and with that our economy.
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