Parametric Reform – Public Service Pension and you

EDITOR: Having had the privilege of being a part of pension reform workshops and discussions, I strongly believe that a reform is needed for the sustainability of pension benefits. The reform discussions must continue to include proper social dialogue with all the affected and relevant stakeholders (or their representatives), along with the reality and mindset that sacrifices or concessions will have to form part of the discussions.

Sacrifices by whom and how much is a point of contention, however, all parties should be willing to compromise for the sustainability of the pension benefits, as it has socioeconomic implications.

In my opinion, the most important thing is that pension reform is executed in a manner that is constitutional. This brings me to the specific issue that plagues my mind.

During these discussions on parametric reform, it was mentioned that the pension terms (regarding the Public Service Pension Plan) under which a public servant began their public service can be altered, to the public servant’s disadvantage.

In a publication by I-witness News, ‘aspiring politician’ Mr. Stewart Haynes (Executive Director) of the National Insurance Services (NIS) said, “So [you] work for 10 years already, this 20% is protected. But for future services, consideration can be given looking at making the system sustainable.”

Let me expand on this example from the ‘aspiring politician’ (see 5th reference), and current Executive Director of the NIS. Lady C entered the service on the 1st January, 2012. She is still working to date, which is 10 years later and plans to continue up to her 33 1/3 year. The pension law that is applicable to Lady C guarantees her particular pension benefits that include the following:

1. Pension Accrual rate of 2% for every year up to 33 1/3 years. For every year of pensionable service, a public servant gains 2% to go towards their pension benefits calculation. It cannot exceed 66.66% or 67%, if rounded off
2. Maximum pension benefit of approximately 67% of one’s last annual salary or 3 year annual average salary for full pension only option, or a reduced pension (75% of full pension) with gratuity option (full annual pension figure × 12.5 × 0.25).

3. A reference point of one’s last annual salary or a 3 year average salary of your best 3 years.

The reference point is needed to calculate one’s full pension, partial pension or gratuity.

Continuing with the example, a new pension law is passed and takes effect from Lady C’s 11th year onward.

Now, what is being stated is that the pension law that makes provision for the 3 aforesaid benefits (which were accumulated during Lady C’s 10 years) will protect the benefits amassed for that period in a prorate fashion.

I have no issue with this, as this is constitutionally sound. So, for example, Lady C will accrue 20% (2% × 10 years) to go towards pension benefit calculation. Also, Lady C’s reference point will be her last annual salary or a 3 year average salary of her best 3 years.

However, it is also being said that from year 11 onward that the pension benefits can be diminished or reduced in a manner that is more disadvantageous or less favourable to Lady C.

From my point of view, that is not constitutionally sound. Section 88 (2)b of St. Vincent and the Grenadines constitution (SVG) states that “in so far as those benefits are wholly or partly in respect of a period of service as a judge or officer of the Supreme Court or a public officer or a member of the House of Assembly that commenced after the commencement of this Constitution, be the law in force on the date on which that period of service commenced or any law in force at a later date that is not less favourable to that person.”

In my legally unlearned mind, changing accrual rates from 2% to a lower figure from year 11 onward is less favourable. Changing the reference point from the best 3 years to more than 3 years is less favourable. You get the picture. Any law that constitutionally modifies the pension benefits must not place Lady C at a disadvantage.

Deuteronomy 19:15 and Matthew 18:15 speak to the issue of confirmation by the witness of 2 or more testimonies. It is on this premise that I will make a reference to 2 high court cases in Grenada that dealt with pension benefits and multiple statements from learned High Court Judges. They make for sound reading and I believe they can help us to become more informed on pension related issues.

I selected Grenada due to similarities with the wording of their constitution, especially as it pertains to the pension laws. The first judgement was for a case between Hermilyn Armstrong v The Attorney General of Grenada et al which Ms. Armstrong won (see references) and the second was Grenada’s Public Workers’ Union et al v The Attorney General et al which once again resulted in a loss for the Attorney General et al (see references).

Please, take sometime and carefully study these judgments by yourself or with others. I will delineate the key statements from each judgement, as it pertains to the aforementioned example with Lady C.

Key statements from Hermilyn Armstrong v The Attorney General of Grenada et al:

• In point 29 of the judgement, Judge Margaret A. Price Findlay states “It stipulates that the law, Shall be the law in force on the date that period of service commenced, or any law in force at a later date that is not less favourable to that person.”

Section 92(2) entitled the claimant at the time she commenced her service as a public officer to a pension under the Pension Act. Cap 214 of 1958”

• In an excerpt from Point 48d of the judgement, Judge Margaret A. Price Findlay states “the claimant, Hermilyn Armstrong, is eligible for pensions benefits, pension and gratuity, under the Pensions Act, cap 214, 1958 Revised Laws of Grenada, which was the law in force when her period of service as a public officer in the public service of Grenada commenced on 17 May 1983.”

The “period of service commenced” as mentioned in Grenada’s constitution refers to the day public servants became employed in a pensionable position, as put forth by the learned Judge. I believe it is no different for the “period of service commenced” mentioned in the constitution of SVG. The pension law which applies to the public servant was the law in force at the time of employment.

Future pension laws could be created and passed, as allowed by the constitution, however they cannot put the public servant in a position less beneficial to them than before, as opined by learned high court Judge Margaret A. Price Findlay. So, for example Lady C’s accrual rate could increase from 2% to 2.5%, or the best 3 year average could reduce to the best 2 year average, etc. as these would be more favourable terms than what Lady C previously experienced.

Key statements from Grenada’s Public Workers’ Union et al v The Attorney General et al :

• Referring to the pension benefits and period of service commenced, Judge Raulston L. A.

Glasgow in point 34 of the judgement states “This section, in my opinion, is not obscure or ambiguous. Its intention is to secure the pension of those who commenced their service after the Constitution came into force on 7th February 1974. In this regard, the pension of a public officer who joined the public service after 7th February 1974 is to be determined by any law that is in force not on 7th February 1974 but on the day that the public officer commenced his or service on behalf of the Government of Grenada”

•  In an excerpt from Point 47 of the judgement, Judge Raulston L. A. Glasgow states “Clearly, as I have stated above, once the law is in place, the Government cannot enact any other law that grants benefits that are less favourable to the public worker than the law which was enacted and was extant at the date that they commenced their service.”

In this case, learned High Court Judge Raulston L. A. Glasgow repeats the views held by High Court Judge Margaret A. Price Findlay. A public servant commences their service when they join the public service, and the pension law that applies to them is the law in place at the time of entering the service. Any future pension law cannot place the public servant (who was already governed by a prior pension law) at any disadvantage.

There is a need for parametric reform, but it must be done within the confines of the constitution and applicable law. We cannot have an approach that is one-sided, or where sacrifice is only requested from one party. We cannot be like the owner of a bakery store who is only concerned about his business and does not care what the consumer thinks about the quality or price of his bread.

On the other hand, the consumer cannot expect the bread to be sold at non-profit prices as that would be selfish, and unsustainable for the owner’s business. So, it is important that any reform that takes place must be legal, balanced and fair, with the goals of sustainable social security, consistent stakeholder engagement and social development at the forefront of all stakeholders’ minds.

Christopher Williams