Pension Reform Steering committee to be established in 2019

A Pension Reform Steering Committee will be established in 2019 to tackle the need for pension reform in St Vincent and the Grenadines.

This was revealed by the finance minister, Camillo Gonsalves during his Budget presentation at the House of Assembly this week, where he said “an urgent and inescapable area demanding creative reform is our pension system”.

Gonsalves said that the issue has been on the agenda for some time and if no reform takes place, the current pension system would prove unsustainable in the medium term.

The Pension Reform Steering Committee will consist of senior government officers from the Ministry of Finance, the Service Commission Department, the Prime Minister’s Office and the National Insurance Services (NIS).

“Pension reform is a very sensitive and complex issue. The main driving force is a reduction of the pension expenditure in the face of continuing fiscal challenges. We therefore strive to make the pension system more affordable, that is, one within the financing capacity of the society that does not unduly displace other national social or economic imperatives,” the finance minister said.

According to Gonsalves, the cost associated with paying pensions and other retirement benefits have been increasing.

He said that the cost of retirement benefits in 2017 was $71.9 million including NIS contributions, which was over 12 per cent of the current revenue that year.

“Indeed, as more persons retire from the public service, an unsustainable incongruity is manifesting itself; a retiree’s pension plus NIS payments can be as much as 126% of her final salary. We simply cannot afford to pay people more in retirement than they earned as workers,” Gonsalves said.

The life expectancy of the population including public servants is currently 74 years.

As such, the finance minister said that the option of increasing the retirement age for public servants from the current age, which is 60, must be considered as part of the reform programme.

He added that this option is even more significant, given that the NIS has increased its pensionable age to be over 60.

Gonsalves said that the 2018 Budget Address outlined six options for pension reform and the government has sought legal advice on a number of these options.

The committee will be chaired by the Director General of Finance and Planning and will coordinate various activities linked to implementing reform options, including the management of public education and stakeholder consultations.