Deputy Prime Minister Peter Turnquest.
By NEIL HARTNELL
Tribune Business Editor
The deputy prime minister says resolving the government's own looming multi-billion dollar pension crisis "is certainly a high priority but not top of the list".
KP Turnquest, in a recent interview with Tribune Business, said the Minnis administration was in the process of hiring consultants who would determine "the way forward" for reforming public sector pensions and how to tackle existing liabilities.
"We have gone out for a request for proposal on a project to look at this whole issue of pensions again," he disclosed. "That should be back shortly and, once we've done the evaluation on this, we will finalise that and come back with a definitive position on the way forward to reforming public pensions in the future and how to deal with existing liabilities."
Mr Turnquest added: "While it's not top of the list, it's certainly a high priority." He was speaking after a Central Bank survey again highlighted The Bahamas' looming retirement crisis given that just over 25 percent of the workforce are covered at present by an existing employer-sponsored plan.
And that is just the private sector. Michael Anderson, president of Fidelity Merchant Bank & Trust, told Tribune Business that the government had its own "massive problems" when it came to pensions and retirement funding given that no organised scheme currently exists for the civil service.
The International Monetary Fund (IMF) has for several years, with increasing urgency, been prodding the Government to address the multi-billion dollar liability it and Bahamian taxpayers face as a result of unfunded civil service pension liabilities.
Previous research by the KPMG accounting firm suggests this unfunded liability is now likely to be approaching $2bn, with the 2018-2019 Budget showing that the Government is currently allocating between $95m to $100m each year to finance civil service pensions during the three fiscal years to 2020-2021.
The IMF, in its Article IV report last year, agreed that the current system - where civil servants contribute nothing to funding their retirement - is "unsustainable". It added: "Staff analysis in the 2016 Article IV Staff report noted that accrued government pension liabilities totaled $1.5bn in 2012, and would rise to $3.7bn by 2030 as the population ages."
The IMF called for reforms that involve "moving to a contributory regime in the near term, and to a defined-contribution scheme in the medium-term". This would require civil servants to contribute a portion of their salary to funding their retirement, rather than having this financed 100 per cent by the taxpayer through the Budget - as is done currently.
Tribune Business also possesses a presentation delivered by the KPMG accounting firm in 2013, the early years of the Christie administration, which provided options for how the Government could arrest a growing liability that threatens to burden future Bahamian generations.
KPMG estimated the unfunded, 'pay-as-you-go', civil service pension liabilities then at around $1.5bn. These liabilities were set to increase to $2.5bn by 2022, and $4.1bn by 2032, unless reforms are enacted.
The IMF, for its part, said in 2016: "Government pensioners (15 per cent of the public work force) receive pension payments from the Budget that, on average, stood at 1 per cent of GDP and 7.3 per cent of tax revenue per year in 1994-2014.
"The accrued pension liabilities [will total] $1.5 billion in 2021 (17.9 per cent of GDP). Pension payments and liabilities are projected to reach $230 million (1.5 per cent of GDP) and $3.7 billion (24 per cent of GDP), respectively, by 2030."
Its 2018 Article IV report projects a $2.2bn increase in these unfunded liabilities over the 18 years to 2030, which translates into an average increase of $122 million per year.
The focus on the civil service pensions also fails to include the multi-million dollar deficits in existing schemes at state-owned enterprises such as Bahamas Power & Light (BPL) and the Water & Sewerage Corporations, where staff pay little to nothing and the contribution burden falls entirely on the loss-making companies.