February 3, 2017

Pension reform again

The critical issue of pension reform again came to the fore during the debate on the Estimates of Revenue and Expenditure earlier this week. It is a matter which has been lurking in the corridors of government for quite some time now, but, due to its political sensitivity, successive regimes have spoken about it without taking any action.

The situation has reached the stage where it can no longer be ignored, given its impact on government expenditure. Prime Minister Gonsalves gave the total amount spent on pensions in 2016 as $ 54.6 million, with an additional $ 2 million to be spent on this area this year.

More worrying, is the rate of increase in this item of expenditure. Government pension spending went up by 11.4 per cent last year, more than three times the rate in increase of the Budget itself. Commenting on this, the Prime Minister said that “the rate of growth has outpaced the growth in recurrent expenditure.” We seem to have heard those concerns before.

This time though, Prime Minister Gonsalves said, the situation has become “unsustainable”, and he has pledged to correct it. “This is one that I do not intend to leave for the next generation of leaders”, he stated boldly. One would have to wait for his Budget address next week for any further indication of how he intends to tackle the problem and the time-frame for doing so.

While it is generally recognized that this is a challenge which must be faced, it is also a very sensitive issue. Pension reform has proven to be a delicate issue in many countries all over the world, one with political implications. Again, it is also a social issue, since it can affect the earnings of persons who have retired and rely on their pensions for their upkeep.

However, in the case of SVG, it is true that there are retired public servants who enjoy the privilege of twin pensions, State and NIS, and it has been claimed that there are some whose combined pensions exceed what they were earning when employed. There is, therefore, bound to be resistance to pension reform in this category, while others about to retire will argue that they should be entitled to the same privileges as their predecessors.

Additionally, in a politically-charged atmosphere, such as that which exists in our country, there will be the temptation to play politics with the issue. These are the risks involved, but we cannot escape the inevitable, and must face up to the challenge sooner rather than later. The more we procrastinate, the more difficult it will be to find a solution, and the more painful for all involved.

What is important is that there be frank discussion between Government, pensioners, the public servants and their unions, as well as with the political Opposition. It calls for maturity, cooperation and willingness for all to work together in the best interests of our nation.