FICTU queries reforms
Elenoa Baselala
Saturday, June 18, 2011
THE Fiji Islands Council of Trade Unions was one of the last to make its submissions on the proposed Fiji National Provident Fund reforms.
Yesterday was the final day of public consultations for the FNPF as it prepares to start implementing some of its proposed reforms from July 1.
Assistant general manager prime services, Tevita Nagataleka, addressed the Fijian Teachers Association and briefed them on the proposed reforms in the afternoon.
The question of the timing of the reforms had been raised at many of the public consultations where the FNPF's response had been the same - the present pension rate is unsustainable and the reforms must be carried out now to ensure the sustainability of the fund in the future.
This was again reiterated by Mr Nagataleka when the question was again raised at the Suva Civic Centre.
The pension rate suggested by the FNPF is around 9 per cent.
FICTU said this would immediately impact some 11,000 pensioners who would have their pensions reduced by 40 per cent (if they are on the 15 per cent rate) or 64 per cent (if they are on the 25 per cent rate).
"Effectively, a pensioner on a present monthly pension of $1000 would only receive $600 if he or she was on 15 per cent annuity and only $360 if he/she is under the 25 per cent when these changes are implemented," FICTU said.
"It should be noted that large numbers of workers in Fiji around 65 per cent earn wages below the poverty line.
"Under the proposed 9 per cent, a retiring member with a healthy standing balance of $50,000 at the end of their working life would merely receive $86.53 per week. How can a family live on such small income?
Mr Nagataleka presented a table on the proposed changes and its effect on members.
The table proposed different rates at different retirement ages.
But while the FNPF acknowledged the differing wage levels in the country, it posed the question on who would pay if pension rates were maintained.
FICTU in its submission had also raised the buffer fund balance which accumulated to $230 million from 1975 to 1999 when it was transferred to the general reserve in 1999.
Mr Singh questioned the FNPF on why it had not disclosed these information and claimed the omission was a poor attempt to convince the present members of the "myth" that their contributions were now subsidising the existing pensioners.
"The facts don't support this as total principal contribution of $525m is yet to be exhausted.
"Therefore, the question of subsidy does not arise. These figures do not include interest earned since 1974.
"FICTU proposes that a sum of $596m be taken out of the General Reserve Account and put into the Pension Reserve," Mr Singh said.
The FNPF presentations at the public consultations however had included a graph showing the declining pension buffer balance presently at about $50m.
"The resultant balance of ($703m) is the true and fair entitlement of the pension scheme.
"Alternatively, as previous studies had done, treat the General Reserve Account as the Pension Reserve for the purpose of evaluating the sustainability of the pension scheme and providing existing benefits.
The other issues raised by FICTU were as follows:
Life expectancy rates
The FNPF in its projection had used the life expectancy of 74 years for males and 78 for females. These figures do not reconcile with the last bureau of statistics figures for Fiji. Therefore, it would be grossly misleading to project viability on prolonged life expectancy which is not supported by verified facts.
These misleading variables would cause distortions in the viability trends and would lead to questionable conclusions, and reduced pensions. The ILO report of 2002 (page 18) said life expectancy was likely "to increase to 73.2 for males and 77.9 for females by 2030".
FICTU has questioned FNPF on why it was using 2030 figures for life expectancy now. At the FNPF symposium last month, FNPF consultant Richard Codron of Mercer said he based his calculations on World Health Organisation figures.
Increased contribution
An increase in contribution by members and employers by 1 per cent each after the 2014 Elections in 2015 and another 1 per cent in 2020 to avert the trend depicted above.
"This is also supported by Promontory Financial Services Group Australasia. With the increased contribution, natural increases in wages and salaries combined with economic growth targeted by the Government and, the 6 per cent interest income from pension standing balances of $703m as shown, the fund would clearly see growth in the future. Scenario with increased in contribution by 4 per cent by 2020," Mr Singh said.
Elenoa Baselala
Saturday, June 18, 2011
THE Fiji Islands Council of Trade Unions was one of the last to make its submissions on the proposed Fiji National Provident Fund reforms.
Yesterday was the final day of public consultations for the FNPF as it prepares to start implementing some of its proposed reforms from July 1.
Assistant general manager prime services, Tevita Nagataleka, addressed the Fijian Teachers Association and briefed them on the proposed reforms in the afternoon.
The question of the timing of the reforms had been raised at many of the public consultations where the FNPF's response had been the same - the present pension rate is unsustainable and the reforms must be carried out now to ensure the sustainability of the fund in the future.
This was again reiterated by Mr Nagataleka when the question was again raised at the Suva Civic Centre.
The pension rate suggested by the FNPF is around 9 per cent.
FICTU said this would immediately impact some 11,000 pensioners who would have their pensions reduced by 40 per cent (if they are on the 15 per cent rate) or 64 per cent (if they are on the 25 per cent rate).
"Effectively, a pensioner on a present monthly pension of $1000 would only receive $600 if he or she was on 15 per cent annuity and only $360 if he/she is under the 25 per cent when these changes are implemented," FICTU said.
"It should be noted that large numbers of workers in Fiji around 65 per cent earn wages below the poverty line.
"Under the proposed 9 per cent, a retiring member with a healthy standing balance of $50,000 at the end of their working life would merely receive $86.53 per week. How can a family live on such small income?
Mr Nagataleka presented a table on the proposed changes and its effect on members.
The table proposed different rates at different retirement ages.
But while the FNPF acknowledged the differing wage levels in the country, it posed the question on who would pay if pension rates were maintained.
FICTU in its submission had also raised the buffer fund balance which accumulated to $230 million from 1975 to 1999 when it was transferred to the general reserve in 1999.
Mr Singh questioned the FNPF on why it had not disclosed these information and claimed the omission was a poor attempt to convince the present members of the "myth" that their contributions were now subsidising the existing pensioners.
"The facts don't support this as total principal contribution of $525m is yet to be exhausted.
"Therefore, the question of subsidy does not arise. These figures do not include interest earned since 1974.
"FICTU proposes that a sum of $596m be taken out of the General Reserve Account and put into the Pension Reserve," Mr Singh said.
The FNPF presentations at the public consultations however had included a graph showing the declining pension buffer balance presently at about $50m.
"The resultant balance of ($703m) is the true and fair entitlement of the pension scheme.
"Alternatively, as previous studies had done, treat the General Reserve Account as the Pension Reserve for the purpose of evaluating the sustainability of the pension scheme and providing existing benefits.
The other issues raised by FICTU were as follows:
Life expectancy rates
The FNPF in its projection had used the life expectancy of 74 years for males and 78 for females. These figures do not reconcile with the last bureau of statistics figures for Fiji. Therefore, it would be grossly misleading to project viability on prolonged life expectancy which is not supported by verified facts.
These misleading variables would cause distortions in the viability trends and would lead to questionable conclusions, and reduced pensions. The ILO report of 2002 (page 18) said life expectancy was likely "to increase to 73.2 for males and 77.9 for females by 2030".
FICTU has questioned FNPF on why it was using 2030 figures for life expectancy now. At the FNPF symposium last month, FNPF consultant Richard Codron of Mercer said he based his calculations on World Health Organisation figures.
Increased contribution
An increase in contribution by members and employers by 1 per cent each after the 2014 Elections in 2015 and another 1 per cent in 2020 to avert the trend depicted above.
"This is also supported by Promontory Financial Services Group Australasia. With the increased contribution, natural increases in wages and salaries combined with economic growth targeted by the Government and, the 6 per cent interest income from pension standing balances of $703m as shown, the fund would clearly see growth in the future. Scenario with increased in contribution by 4 per cent by 2020," Mr Singh said.
Housing, education, medical and hardship
FICTU proposes the present policy of withdrawal for key purposes such as education, housing, medical treatments and hardship must be continued.
The continuous training and professional development of members must be supported. These are directly related to national productivity and excellence and in increasing household earning capacity. The FNPF will still accept submissions which can be emailed to fnpfconsultations@fnpf.com.fj.
FICTU proposes the present policy of withdrawal for key purposes such as education, housing, medical treatments and hardship must be continued.
The continuous training and professional development of members must be supported. These are directly related to national productivity and excellence and in increasing household earning capacity. The FNPF will still accept submissions which can be emailed to fnpfconsultations@fnpf.com.fj.
No comments:
Post a Comment