Pension reform high on 2021 agenda as payments escalate

Minister of Finance and Economic Planning Camillo Gonsalves says his government is hoping to have “constructive conversations” with representatives of the trade union movement and other stakeholders this year to iron out the problem of the escalating payments to pensioners which pose a challenge to the health of nation’s economy.

The importance and urgency of meetings to address the issue came out in the finance minister’s presentation of the 2021 budget estimates to parliament on Wednesday. He was at the time expressing concern over the fact that his government’s provision for pension payments had climbed to 50 percent over a decade.

“Pension continues to be one of the single-most significant items of the recurrent expenditure for 2021. Budgetary provisions for pensions have grown by over 50 percent in the last ten years,” he said.

“This growth in a non-contributory pension scheme obviously poses significant fiscal risk, and the government again reiterates its intention, as we did in discussion with representatives of the labour movement, to pursue pension reform to ensure the medium and long term sustainability of our system,” the finance minister said.

This country is faced with the situation where many retired civil servants are receiving two pensions – a non-contributory pension for their work in the civil service and a pension from the National Insurance Service for their financial contributions to the state entity.

In recent years, the issue of retired civil servants receiving two pensions.
During the reign of the New Democratic Party (NDP) a bill was passed allowing for employees who joined the public after 1983 to receive only the NIS pension.

But, then came some political activities which saw political tension which escalated amid the then government’s push to pass what was called the “greedy bill’ and demands from teachers for a 30 percent hike in salary.

The unstable political environment saw early elections being called midway in the NDP government’s fourth term in office. As a result of political pressure, the pension legislation being rescinded.

The question which has arisen is whether the government present will take a bill to parliament to discontinue the payment of two pensions for public servants employed after a particular year.

“In the area of pensions for retired civil servants, and government’s counterpart contributions to NIS for civil servants currently employed, the amount provided for is $73.6 million,” the finance minister said as he presented this year’s budget estimates.

“We hope to have pension reform high on the agenda for the upcoming budget year.”

Speaking about the impact the dreaded Covid-19 pandemic has had on the progress the thrust to resolve the issue, the Finance minister further stated: “I know, we’re cognizant of the fact that I made a similar pledge last year, but the immediate challenges posed by the economic fallout of the pandemic caused us to defer some of those consultations to 2021.

But, there is a limit to how many times we can defer those consultations given the exponential rise in our provision for pension,” Gonsalves stated.