After failing to implement a new contributory pension program for the public service last year, Deputy Prime Minister and Minister of Finance Peter Turnquest said yesterday that defining that new program is a policy priority for the upcoming fiscal year.
In June 2018, Prime Minister Dr. Hubert Minnis announced his administration was taking the first steps toward rightsizing the National Insurance Board’s (NIB) pension fund by requiring new hires to contribute to a mandatory pension program, in order to begin to seriously address a large pension shortfall.
Turnquest said it’s one area where the government is seeking to save millions in fiscal liabilities.
“You spoke about the pensions. Let’s recognize that the pension liabilities that exist today, even if we switch to a contribution plan, that’s not going to fix that accrued liability, that is fixed. So, we have to work that down. It does help us to limit the liability going forward. That is an important initiative that we are undertaking,” he said while appearing on the Guardian Radio talk show “The Revolution” yesterday.
“We are this year – I know we tried to do it last year – but this year, we will hopefully get the actuaries in to help us to refine that program. We said as a policy priority that new permanent and pensionable employees, we want them to be on a plan where they do contribute. But there’s nothing that we can do with respect to existing employees because you know we’ve got union agreements involved.”
The government has been urged by several economic watchdogs to increase Bahamians’ NIB contributions in order to stave off the collapse of the fund due to the huge financial obligations from pension liabilities.
The Inter-American Development Bank’s (IDB) Bahamas country strategy report for 2018–2022 explains: “The accounting firm KPMG warned that public sector liability due to pensions will be unsustainable by 2032 and could trigger a fiscal crisis and large increases in the national debt beyond the already concerning elevated levels.”
Turnquest said addressing that along with putting more attention on restructuring the overall economy, is a slow, steady process, but he believes it can be done.
“One of the things that is true, that I would like to see us put some attention to, is the idea of the overall economy. That is, the government, for instance, is the largest employer in the country. Well, if we’re the largest employer, think about that, how do we pay for that? Of course, we have to tax everyone else. It’s upside down. The largest employers in the economy ought to be in the private sector and a smaller government that we can all pay less to fund. But even that flip is not going to happen overnight, but it can be changed over time and that’s what we’re focused on,” he said.
“That’s why we put such a heavy focus on these small and medium-sized enterprises, because we’re trying to encourage Bahamians to say I don’t want a government job, I want to be in the private sector producing something, being my own boss or working in an industry that I feel productive in and I am contributing to. That would take a lot of pressure off government and allow us to bring the cost of operating government down and the tax burden down. And then we can start to deal with these deficits and the national debt that we have. So, we’re making a conscious effort to try and flip this inverted pyramid back in a proper state, but it’s not going to be an overnight thing.”
The IDB has said NIB commitments amount to 160 percent of gross domestic product, while being underfunded.