Board has plan to plug public pension hole
(CNS): The $226 million future hole in government’s public pensions does not mean civil servants will be destitute when they retire, officials said this week. The Public Service Pensions Board has submitted a plan to government mapping out a way to deal with the liability long before the fund will need to meet the payment obligations. The annual report was tabled in the Legislative Assembly Friday and revealed some serious financial challenges for the pension funds it manages for public servants and politicians, but the deputy governor and the board said the plans remain in “good financial health”.
In a statement Tuesday, the board said the plans would provide “stable pensions” for future civil servants when they retire and that the funds’ assets currently stand at over half a billion dollars. While it is facing a future deficit, it is not obligated to meet those liabilities yet and is meeting all of its obligations to current pensioners.
Government pays in 12% of the civil service wage bill every month but also makes additional payments into the plans to address the future shortfall. Officials noted that the extra cash that government injects into the fund over and above the ongoing contributions for existing workers is constantly under review. Now, with the help of Mercer, the PSPB’s actuaries, the board has developed a funding proposal for government’s consideration.
“This proposal, once approved, is expected to service the deficit not only for the main Public Service Pensions Plan, but also for the Parliamentary Pensions Plan, based on a 20-year payment schedule,” officials said, adding that the Judiciary Pensions Plan, which it also manages, is currently in a surplus position with existing assets that are greater than its future liabilities.
With experts suggesting that most public service pension plans around the world are unfunded with no assets set aside and benefits paid entirely from government revenues, officials said that Cayman, in contrast to other jurisdictions, was in a reasonable position after government had the “foresight to establish the PSPB” to administer fund assets that are now worth more than $500 million.
The pension board said that it was looking forward to government’s continued cooperation to ensure the long term stability of the plans.
Although the annual report is now a public document, having been laid on the parliamentary table, it is not available on line either on the PSPB website or the Legislative Assembly website.
It was presented in the LA by Franz Manderson, on Friday, who said the fund was in “good financial health” with a diversified portfolio which was providing above average returns. He admitted it was underfunded for its future pensioners but it was more than able to pay its current retirees from available assets.
In 1999 the government plan moved from a defined benefit plan paying out a fixed amount each month to pensioners, to a defined contribution plan which pays out an amount dependent on whats paid in and the performance of the fund.
Category: Government Finance, Politics
Sooo, the plan appears to hinge on Government contributing more over the next 20 years? Um, but the problem was created by Government not contributing enough over the last 20 years. I’m thinking that perhaps a Plan B from the mice and men at the PSPB is in order.
Is it a plan so cunning as to be a fox who’s just been appointed Professor of Cunning at Oxford University?
Better not let Tony and Al know there is hole plugging going to be taking place.
plan A….let the private sector pay for it….like we pay for your health care! and your roads/schools/hospitals/your own airline etc etc
What I find stunning is this view by the private sector that they are somehow not part of the nation. Like the private sector does not drive on the roads, their children do not go to the schools, they do not get sick or injured and go to the hospital, they do not fly on Cayman Airways, etc. Apparently national institutions are not for the private sector and only things that the private sector approves of (which apparently doesn’t include driving to work, being educated, or healthy) should be pursued in the national interest.
So government can’t even manage and properly bank their own pensions for Civil Servants but want to amend laws to what can and can’t be done by ppl who actually pay in to a pension fund?? This is so damn funny. ABOLISH THIS PONZI SCHEME!!
Thank you Pension Board members. This sounds like a practical solution. Design a realistic plan for the long term viability of the Fund, but no need to panic. The Minister sees no other way than penalizing civil servants for the failure of their employers to pay appropriate amounts into the fund to make up for all those unfunded years – that’s the wrong way. The spin-off effects of that would be (in my humble opinion) a disaster.
“Fifty per cent of what you read on the internet is false, the remainder is just made up”
Abraham Lincoln.
50% of what you just said is false. Mark Twain
I’d agree with you, but then we’d both be wrong.
Let me guess, the “plan:” involves government putting in more contributions? The amount contributed is @under review@ is a bit of a give away. The judiciary pension plan is rather irrelevant, being a separate plan and not that large, but if I were the Chief Justice I would start to worry that maybe part of the “plan’ is to steal the judicial plans surplus to fund the other plans deficit.
Franz Manderson apparently made the following statement in the LA during this sitting. He stated on Friday that the public service pension “…..fund was in “good financial health” with a diversified portfolio which was providing above average returns. He admitted it was underfunded for its future pensioners but it was more than able to pay its current retirees from available assets.” Unless I have had this matter wrong all these years, I understand the situation to be much different, in that the issue is primarily ‘Past Service Liability’ for existing pensioners because there was no pension plan for civil servants before the plan was established. It is that liability that is unfunded. Please correct me if I am wrong.
As you correctly observed the pension plan post-dates a lot of Civil Service employees, much less pensioners. So the current civil service ‘defined pension benefits’ employees are paying in to the fund and that’s enough to pay the pensions for the current already retired defined benefits pensioners. So the Fund is in good shape. For now. (The above may be a slight oversimplification, see below.)
The ‘problem’ is going to come in a few years when this new source of Government revenue (new meaning post ~1999) no longer outweighs Government’s contracted liabilities to its retired and existing staff, i.e., the ‘past service liability’. This has been known since the beginning because the ‘problem’ pre-dates the pension plan and the pension plan payments were never expected to fully fund the ‘past service liability’. (Indeed they can’t. You can’t save thirty working years worth of money in 15-20, or less, years of working.) So what has been known from the beginning is that if Government wants to get the Past Service Liability off the books they need to pay extra in to the Fund every year so that eventually the Fund’s interest income will be large enough to pay the retirees as they retire. At some point the number of retirees on the Defined Benefit plan will begin to dwindle, at which point the Fund theoretically begins using capital to pay off pensions, with the goal of the fund being about zero when the last Defined Benefits retiree passes.
This is of course complicated by the Defined Benefits and the Defined Contributions plans being managed as a single Fund, which reduces management costs but makes the accounting a bit trickier. So the Fund will never zero out, it will just eventually all be Defined Contributions money in the Fund. It is also further complicated by the Legislator’s Pension Fund being in the same Fund which they qualify for after one term, so the Past Service Liability there is even greater.
Note: I am not involved in the pensions administration, so the above is just my understanding of the situation.
Just cut the final benefits by 5% or so and the deficit will disappear.
Minister Rivers
The Public Service Pension Board in compliant with the law submits Annual Reports.
On your website for private sector pension plans the National Pension Office website the last National Pension Board Annual Report is the 2008 Annual Report.
Minister Rivers please stop the public relations pronouncements tell the public the truth about your Pension Ministry’s and National Pension Board Annual Reports.
Have any reports been prepared for the years 2009 to 2015, seven (7) years of Annual Reports?
If no you or the Ministry have not received the Annual Reports from the Board then as the Minister responsible for pensions, what have you done about it and who is being held responsible for not producing the Annual Reports, with the consequences?
If yes you or the Ministry have received the Annual Reports, then as the Minister responsible for pensions explain why for the years you have been the Pension Minister why did you not present the Annual Reports to the LA as required by the law?
CNS please ask Minister Rivers and the Deputy Governor these questions then tell us her answers.
Time 4 Truth
Tara river mush be the governor for this island.
2008 Annual Report? quite an achievement! Better something than nothing. Pun intended.