....Pensioners beware!
It is time to be prepared and not to panic. If you are formally retired or likely to do so in the next few years, then some caution with your finances are warranted.
Pension funds have historically delivered dividends upwards of six percent. These returns are unlikely to be delivered in 2012. Consequently, the payouts from your pension fund could be trimmed back. Particularly worrying are the cases of pension funds already in financial strife.
The case of the Fiji National Provident Fund (FNPF) is instructive on this count. FNPF is slipping into insolvency (i.e. where the value of current liabilities exceeds the value of assets).
It needs an injection of around half a billion Fijian dollars to make it solvent. Finding this sum in the current uncertain environment will be costly.
FNPF is in the process of trimming down pension payments from the prevailing 15 percent of equity to 8.7 percent which is to take effect from March 1, 2012. This amounts to a drop in income of a retiree dependent on FNPF of 42 percent. It will hurt, particularly in a climate of high inflation and in a situation where there are no other sources of income.
The capacity to replenish income falls with age and when medical expenses are likely to rise. So pensioners, beware!...
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