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Dpm: Something Must Be Done Over Pensions

Deputy Prime Minister Peter Turnquest.

Deputy Prime Minister Peter Turnquest.

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Bahamas' retirement funding crisis must be given "focus", the deputy prime minister agreed yesterday, given the ever-increasing drain it threatens to impose on the nation's resources.

KP Turnquest, responding after the Central Bank's latest private pension survey reaffirmed that almost three-quarters of Bahamian workers are not covered by any formal plan, said this finding coupled with the low national savings rate meant that government-led action was imperative.

With the National Insurance Board (NIB) becoming "more and more challenged", he warned that future Bahamian retirees cannot rely on the state to maintain their living standards and incomes after leaving the workforce.

This means it will become increasingly important for all Bahamians to make provision for their own retirement, but the failure by many to do so has resulted in frequent calls from pension industry players for participation in such schemes to be mandated by legislation.

Mr Turnquest yesterday cautioned, though, that any legal reforms that made it mandatory for Bahamians to participate in pension schemes - either employer-sponsored or their own individual plans - would require extensive public consultation and research before becoming law.

He also did not commit to a timeline for addressing The Bahamas' savings and retirement woes, which many observers have described as a "ticking timebomb" for a society that traditionally directs its resources to consumption spending as opposed to long-term savings.

"Given the environment it's an area we're going to have to bring some kind of focus to given that the level of savings in the country has been relatively subdued," Mr Turnquest told Tribune Business of the low private pension participation rate.

"The weight being put on national resources and what's happening with NIB means it is a consideration that we're going to have to consider at some point. As the population ages this becomes more and more of a concern, and the NIB programme as currently structured is going to become more and more challenged, so the need for pensions and private savings will become more critical as we go forward.

"Thus far we've been able to provide assistance through the Old Age Pension facility and NIB, but as the age and demographics shift, this is going to become more and more of a weight, so looking at alternatives is the smart thing to do."

The Central Bank's survey of private pensions for 2016 and 2017 revealed that NIB benefits, together with personal savings linked to insurance annuities and private schemes, represent the major sources of Bahamian retirement funding.

However, actuarial projections that NIB's $1.6bn reserve fund will be exhausted come 2029 means that comprehensive reform is required within the next few years to rescue the nation's social security scheme, potentially impacting benefits to retirees as indicated by Mr Turnquest.

With just 25.7 percent, or 52,363 out of a 200,000-plus workforce, covered by a formal retirement plan, pension fund managers and administrators have repeatedly called for legislative intervention to help head-off the looming burden presented by Bahamians who lack sufficient income to cover their golden years.

Mr Turnquest, though, likely mindful of the financial impact to small and medium-sized businesses (SMEs) if they were forced to provide pension plans for their employees, said careful study was needed before making such initiatives mandatory.

"It's one that has to be given a lot of thought and research if you're going to talk about some kind of mandatory pension or savings initiative," he told Tribune Business.

"Whenever we talk about any kind of mandatory structure it requires a whole lot of consultation with the public. It's not a short-term thing but the conversation needs to be had."

The absence of any timeline for government action will likely disappoint pension industry operators. Michael Anderson, RoyalFidelity Merchant Bank & Trust's president, on Thursday had called for The Bahamas to "make inroads" on bringing a 22-year effort to introduce pension legislation to a speedy conclusion.

Suggesting that it focus on regulating existing schemes and industry operators before addressing whether to make pensions mandatory, Mr Anderson warned that The Bahamas was storing up "future trouble" for itself unless it took immediate action to alleviate the growing retirement crisis.

The Central Bank survey, too, also pushed in this direction on the basis that the 35 percent response rate to its survey, with just 49 out of 140 existing and potential pension plan sponsors responding, "underscores the importance of concluding and activating the regulatory framework for private schemes".

It added: "Currently, the draft Bill for pension fund regulation - the Employees' Pension Fund Protection Act 2012 - is still pending approval prior to implementation. The Bill would permit more comprehensive monitoring of activities, especially as it relates to smaller plans.

"As contemplated, the regulatory framework for private pension plans would also reinforce mandates for prudent management practices within private schemes."

Comments

Well_mudda_take_sic 3 months, 1 week ago

Just keep doing what you've been doing all along KP - nothing but blowing hot air out of your mouth every few months about the matter!

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The_Oracle 3 months, 1 week ago

So with successive administrations bankrupting the EXISTING pension fund, You are just going to start another and saddle the employers with it? Besides which, the minute ya'll see any money in it you will amend/finagle or otherwise just steal it! (as was done with NIB) BTW, try funding your own INSOLVENT Government Pension fund, without taxing the public for it.

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truetruebahamian 3 months, 1 week ago

We have always had to look after ourselves with prudent living, savings and making provision for our own and our family's future. What now - those who were wise enough to store their food for the winter will have it taken away and redistributed by law to the unwise and profligate? Think again!

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TheMadHatter 3 months, 1 week ago

Wow. Dont you three think you are being a little harsh here? Im not the biggest fan of the VAT Hiding KP, but....he did say it needed MUCH further discussion and was not going to be in the near future.

K.P., respectfully sir, would you guys please consider making a bankruptcy law like they have in the US where you can sell all your assets and declare bankruptcy every 7 years at the same time as you are currently getting ready to implement the new credit rating scheme?

Some banks are taking REAL advantage of Bahamians with vulture loans. They dont care about risk or your life or nothing because the law is on their side. With consumer loans they dont even have to give you a printout of your loan payments, interest etc nor even provide this information online.

I could tell you their names, but Bannister told me his cell is kinda cramped. But im sure you know who they are.

This would go a long way to helping Bahamians be able to save a red cent. Red? Hey that's FNM color - so maybe that will help inspire you. Thanks for your kind consideration.

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Well_mudda_take_sic 3 months, 1 week ago

What KP isn't telling us is that he and Minnis want to borrow almost $3 billion, that's right, nearly $3,000,000,000 to fund the unfunded pension benefits owing to all civil servants and all employees of government corporations. Most Bahamians do not know that nearly $200 million, that's right, $200,000,000 of BPL/BEC's impending $550 million borrowing is for the purpose of funding the unfunded pension benefits owing to current and past management personnel and unionized employees of BPL/BEC. These are the very same people who have run BPL/BEC into the ground, many of them being non-productive family members, close friends and political supporters of our corrupt political elite, whether they be of the PLP or FNM kind.

Yes indeed, KP and Minnis want to borrow billions of dollars willy-nilly to fund the unfunded pension benefits created for the most part by corrupt FNM and PLP politicians who over many decades have grossly over-bloated the civil workforce and the head counts at government corporations with over-paid and non-productive workers. Borrowing to pay 100 cents on the dollar of these unfunded and grossly over-generous pension benefits is tantamount to KP and Turnquest supporting and rewarding decades of wrong doing by of our corrupt politicians. And to think KP and Turnquest would rather do this, and thereby significantly increase our already unsustainable national debt, than reduce the size of our grossly over-bloated civil workforce today, not to mention the over-staffed situation at all of our government corporations.

Meanwhile the national insurance fund is technically bankrupt by any professional actuary's definition and these two bozos (KP and Minnis) are about to propose the required contributions from employers and employees be jacked up to levels that no enrolled participant can afford. What a joke!

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observer2 3 months, 1 week ago

Well muddy, you are spot on.

BEC $550 million US$ bond issuance to fund $200 million in BEC pensions is the test and template to transfer the government bank debt to foreign and bond holders or the general public.

The banks that now hold the government debt/pension payments now want it off their balance sheets not that the ppl are being taxed into oblivion and the national debt dropped by $30 million (a flash in the pan on the $12 billion in debt on an accrual basis including the current value of future pension payments).

Let’s face facts and stop the smoke and mirrors...the Bahamas is essentially broke and all this borrowing will finish us off ($750 million to Hot Mix to repair all the broken down runways in the Bahamas, $550 for BEC to pay off old debts, and $3 billion for the unfunded general government pension fund).

Ohh, don’t forget, it’s hurricane season which usually costs $100 if we are hit.

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TheMadHatter 3 months, 1 week ago

Well if they are so broke, then what group of genuine idiotic fund managers in the US is going to invest in Bah bonds? Our rating of just-above-junk and junk respectively actually prevents certain funds from buying our bonds due to restrictions in theie charter abd/or SEC regulations. Would YOU buy Haitian government bonds? No. Abd neither will anyone else, seeing how we are just a branch district under Haiti. So we dont have to worry about no more debt.

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Giordano 3 months, 1 week ago

They already taxed the public on the pretext of paying the national external debt and rather than seen the mentioned debt reduced today,we only see it more inflated than ever before,and the borrowing never stop just to please the pockets of twenty plus keys people including all members of cabinet every four to five years,and sometimes the cycle repeat the same people again to be millionaires TWICE. All under big time impunity and adding more and more crime which is all the way down priority of the government to solve. Mudda_Sick is all right : "All they do is to blow hot air out of their mouths taking about the same topics over & over again.

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birdiestrachan 3 months, 1 week ago

Nine thousand dollars a month just for the Govoner Generals rent for how long only the Good Lord knows. when there was no emergency to make MR CA Smith Govoner

Consider how many Govoner Generals the Bahamas has. pension. car and driver for as long as they and their mate lives are very expensive.

Doc and his cabinet and the office of the spouse all are concerned with living large while the poor suffer.

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sheeprunner12 3 months, 1 week ago

The Minister of Finance should tell the Bahamian people ......... How much unfunded pension debt is held by the SOEs? .......... How many Bahamian retired civil servants currently collect pensions on the Government payroll ........... How much does the "former politicians" cost the Bahamian tax payers each year .............. How much will the unfunded Govt pension fund rise in the next 10 years - when all of the baby boomers finally retire (after 50 years of service) ......... No time for hand wringing KPT ........ Come clean and let The People know the TRUTH.

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DDK 3 months, 1 week ago

I believe NIB was established shortly after the great INDEPENDENCE some forty-five or six years ago. The millions and millions of dollars of contributions by the business community and its employees since that time would more than adequately cover medical benefits and pensions covered by the Scheme if successive governments since Independence had not used NIB as their cash cow for one lame-brained project after another as well as just to line their pockets. This Minister needs to stop yakking and FIX IT!

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Well_mudda_take_sic 3 months, 1 week ago

It was none other than Hubert A. Ingraham who said to PM Poodling back in the day when Ingraham was a die-hard PLP'er:

"Prime Minister, you know this national insurance thing is great for the PLP government ....we kill two birds with one stone....we take care of the people's retirement needs and at the same time get access to the funding we need to maintain and grow the country's infrastructure."

What a joke that has turned out to be!

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sheeprunner12 3 months ago

Yes Mudda ........ HAI started the exploitation of NIB coffers for low cost housing .......... 40 years later, it is broke with many white elephant projects

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