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Unfunded Government Pension a Worry

Fiscal Problem In Barbados ! eb2d17288e33d24ec34a90fd04dca0d0 Dr. Justin Robinson recently shared some interesting information on Facebook, he attempted to breakout government expenditure and revenues – see the presentation, ‘facts on the Fiscal Situation in Barbados last 20 years. A focus on Transfers and Subsidies‘.

Successive governments have been challenged by the size of the transfers and subsidies allocation and it has become more so in the last decade given the fiscal challenges being experienced. Although out of the scope the blogmaster used the opportunity to question the chairman of the NIS about government’s non NIS pension liability. Private registered pension plans AND the NIS receive input from actuaries to inform the level of funding required to ensure they are able to meet future obligations.

It is an open secret the pension plan which covers statutory agencies, members of parliament and other public sector agencies continue to be a significant pension expense for government. From arms distance the fund appears to be ‘under-funded’. This is the interesting point of the exchange on Facebook with the Chairman.

David King Interesting to see how you sliced the time series Sir. Was this by special request?
Justin Robinson I just went decade by decade
David King Do you have analysis of the pension expense for the same period for public sector separated by MPs, PSs, and other grades? Any info at all?
Justin Robinson the pensions were only broken out as a separate line item from the years shown. we can make some inferences. There is supposed to have been a sharp increase in retirements in the last five years or so.
Justin Robinson I am hoping that a comprehensive reform program is part of the campaign, so we can get buy in from the populace.
David King The concern by many is the existing burgeoning pension obligation.
Justin Robinson the unfunded pensions in the public service is a major issue that needs to be addressed. No doubt about that one. With pensions and interest, there has been less flexibility in terms of public expenditure than many think.
David King How is the pension managed? Who has oversight? Is it that the government has recourse to fund therefore there is no legal obligation to ensure the plan is adequately funded?
Justin Robinson the pensions mentioned are those not covered by the NIS.
Justin Robinson the public sector has a fairly large legacy of noncontributory pensions.
Justin Robinson as Philip mentioned persons have legal entitlements that were never part of a contributory scheme.
See full exchange on Facebook page – FB Senate

This is a highly technical issue and one worthy of public discourse to ensure an ignorant public is educated about one of the more hidden liabilities taxpayers and their children will have to honour in years to come. Here is a link to the approved 2017 -2018 Government Estimates. Select the Find option and enter the word pension, the size of the pension expense  of government will shock you.

The blogmaster is hopeful the BU intelligentsia will assist with the defogging of the issue.

105 responses to “Unfunded Government Pension a Worry”

  1. NorthernObserver Avatar
    NorthernObserver

    I hadn’t read the FB exchange…..”Dr JR: the pensions were only broken out as a separate line item from the year shown. we can make some inferences.”

    Hence are we to infer “Grants to Individuals”,referenced earlier, is Pensions? And if they were “broken out” what were the broken out OF, as I see no corresponding deductions of that magnitude.
    Glad to see VH is alive and well.

  2. NorthernObserver Avatar
    NorthernObserver

    On AG report….good point. Cannot necessarily SEE them, but when I find 2008, it is helpful to know if 2009 onward are available.

  3. Bernard Codrington Avatar
    Bernard Codrington

    @ David at 5:52 PM

    I am not sure what Dr .Robinson’s point is as it relates to unfunded public sector pensions. You are the person who said it was unsustainable. I would need to have the facts to agree or disagree with your position.

    An “unfunded” pension is sustainable both in the Private and Public sectors as long as they are budgeted for and the entities generate the revenues to effect the transfers.

  4. David Avatar
    David

    @Bernard

    We seem to be going around in circles. Based on what we know of the financial health of SOEs cant we agree unfunded pension is a worry?

  5. NorthernObserver Avatar
    NorthernObserver

    @BC…from the FB exchange
    “Justin Robinson: the unfunded pensions in the public service is a major issue that needs to be addressed. No doubt about that one. With pensions and interest, there has been less flexibility in terms of public expenditure than many think”

    The point he makes repeatedly…”Justin Robinson: in my opinion the adjustments going forward have to be based on expenditure reductions. the nature of these cuts will require a political mandate”

  6. Bernard Codrington Avatar
    Bernard Codrington

    @ David at 6 : 57 PM

    My short answer is no.

    A pension is an agreed condition of employment and is a binding contract that should be fulfilled and GOB should set an example. It is illegal and political unacceptable not to do so.

    Whereas a private company may claim /file for bankruptcy, a Government is continuous and cannot walk away from its obligations.

    These SOES when they were part of the Civil Service were funded from the Consolidated Fund via taxes. Somebody got hoisted by his own petard.

    @ Northern at 7 :10 PM

    I would have to see these excerpts in their context to understand what Dr Robinson intended to say.” Expenditure reductions” cannot translate to pension cuts. But he is quite right that there is less ( I say no) flexibility in terms of public expenditure.

    Even in a private bankruptcy wages and pensions rank before all other debt obligations.

    I hope this makes clear my position on this matter.

  7. Hal Austin Avatar
    Hal Austin

    NorthernObserver January 19, 2018 at 6:50 PM #

    Hence are we to infer “Grants to Individuals”,referenced earlier, is Pensions?

    No. A pension is legally defined as delayed pay, not a ‘grant’ from your employer.. In the UK pensions became a problem when they were shifted from under the umbrella of HR to that of the finance director, where they appear on the books. So, as in Carillion, we her a lot about pensions deficit.
    So the idea of an unfunded pension is a misnomer.

  8. Bernard Codrington Avatar
    Bernard Codrington

    @ David

    I still require the dollar values of transfers for pensions over the period. I deal in facts not assumptions.

  9. Hal Austin Avatar
    Hal Austin

    Bernard Codrington January 19, 2018 at 7:50 PM #

    Even in a private bankruptcy wages and pensions rank before all other debt obligations.

    In the UK, if a company goes in to bankruptcy with a defined benefit pension deficit, it is usually taken over by the Pensions Protection Fun, a lifeboat. Those pensions that are already in payment continue to be paid, those not yet in payment automatically lose ten per cent of the pension promise.
    Since a defined contribution pension member carries the risk, the problem is different. It depends on the performance of the investments.

  10. Bernard Codrington Avatar
    Bernard Codrington

    @ Hal Austin at 7:51 PM

    I agree with you. A pension is a delayed salary and not a grant. It is decided in the same manner as a condition of engagement. So any future politician looking to that as a solution will be upsetting both law and convention.

  11. Hal Austin Avatar
    Hal Austin

    Bernard Codrington January 19, 2018 at 7:56 PM #

    I still require the dollar values of transfers for pensions over the period. I deal in facts not assumptions. (Quote)

    Pensions are based on actuarial assumptions. So the transfer value is an estimated value, based on an assumed growth figure, currently seven per cent annual growth..

  12. Bernard Codrington Avatar
    Bernard Codrington

    @ Hal Austin at 8 :03 PM

    There is a misunderstanding.
    Transfers is a line item in the Expenditure of the GOB Estimates. I need to see whether the provision for public pensions have increased over the ten year period as is implied in the article by David. I also need to see whether it coincided with the raising of the age to retirement. In any case it would be balanced by lower salaries in a process of staff reduction.

  13. Wily Coyote Avatar
    Wily Coyote

    @ALL

    Question — assume BARBADOS devalues it’s currency from 3:1 to say 10:1, what happens to the unfunded pensions. As the majority of BARBADOS debt is locally held then I suspect the unfunded pensions are now no longer a big issue, right or wrong. Debt was accumulated at 3:1 and after devaluation is payable at 10:1, instant 300+% saving.

    Local debt settlement is easier dealt with than forgien debt, ie: you piss off your local populace vs incur the wrath of the sanctioning international bodies.

    Food for thought.

  14. Hal Austin Avatar
    Hal Austin

    Bernard Codrington January 19, 2018 at 8:41 PM #

    Transfers is a line item in the Expenditure of the GOB Estimates….

    In conventional pension speak the transfer value is the value attached to a pension pot which is being moved to another manager. For example, you have worked for Coca Cola for 20 years and got a job with Pepsi and seek to transfer your pension to Pepsi. You will have to get a transfer value – Coca Cola will try to give you as little as possible, Pepsi will want as much as possible.
    Pension accounting is a specialist area and not one that most experienced actuaries and consultants will ever try to understand. In Barbados we do things differently.

    @ Wily Coyote

    Question — assume BARBADOS devalues it’s currency from 3:1 to say 10:1, what happens to the unfunded pensions…

    Over the last year, the US dollar (Bajan dollar) has plunged to its lowest level in three years against a basket of trade-weighted currencies. In other words, there has been a devaluation, something that has not been discussed in parliament, the traditional media, or the blogs. During this time, the S&P 500 has returned over 21 per cent, including dividends. (plse get the NIS to explain this against its investment policy).
    Worst of all, our academic economists seem not to even realise that is economy is fluctuating like a seesaw.
    Endogenous debt is not a big problem, it can be inflated away – at great political risk – by flooding the market with dollars. The government can also do a deal with the NUPW and other public-sector union: productivity growth for wage growth.

  15. Bernard Codrington Avatar
    Bernard Codrington

    @ Hal at 9:09 PM

    Please reread the submission and the tables in the attachment. Transfers in this context relates to transfers from the Consolidated Fund to State Owned Institutions such as QEH, IDC. BAMC etc.

  16. NorthernObserver Avatar
    NorthernObserver

    @BC
    Dr Robinson is referring to ALL EXPENDITURES, He is not promoting one over another, or even suggesting Pensions be cut. What he does say is pension expense is significant.

    His greater point, on which I gravitate, is the need for a “political mandate”, which I infer to mean “a mandate to perform these cuts” because, the current administration did NOT run on that platform. Hence, he would like to see the various parties run on such a platform. I think this is a pipe dream.

    I would contend, any party which is duly elected, has the mandate to RUN the financial affairs of the country as they see fit. The current administration did not run on increasing NSRL?

    What boggles my mind, and his efforts to ‘extract information’ are valiant and admirable, beg the question, why is this information not easily and currently available. Why are so many of these SOE’s and statutory bodies years behind in Reporting?

  17. Adrian Loveridge Avatar
    Adrian Loveridge

    Let me see if I have this right. According to David’s and Caswell’s, figures then each Minister who has served at least 8 years and is 50 years of age and has a possible life expectancy of 30 years will be paid over BDS$7.15 million in pension. I pose the question again – is this taxable like the rest of us?

  18. Hal Austin Avatar
    Hal Austin

    Bernard Codrington January 19, 2018 at 9:34 PM #

    Please reread the submission and the tables in the attachment. Transfers in this context relates to transfers from the Consolidated Fund to State Owned Institutions such as QEH, IDC. BAMC etc.(Quote)

    I have re-read it. The principle is the same. If the original pensions came from the Consolidated Fund, there was a cost; if responsibility then is transferred to a statutory body, that cost is transferred.
    The estimated cost of the transfer is then calculated actuarially. It helps to forget the terms Consolidated Fund and statutory organisations. Think that the cost is being transferred from one pension provider to another.
    The calculation is then based on the actuarial metrics.

  19. Well Well & Cut N' Paste At Your Service Avatar
    Well Well & Cut N’ Paste At Your Service

    They got to start tying good performance and stellar accomplishments to ministers accessing these bloated pensions, they have all become too accustomed to doing very little work and gaining access to millions for being lazy during their tenures…while selling out the people to the highest bidders for the duration….this has happened for decades.

    One really disgraceful example….Mara Thompson, lazy, incompetent, lacking vision, did absolutely nothing for St. John as MP for St. John, yet she got the audacity to still be drawing not only a widow’s pension, but also a salary…at taxpayer’s expense,…..

    ……add her to the other useless, avaricious ministers from Fruendel on down and the taxpayers have been robbed blind for 10 long years..and will be robbed until these parasitic ministers leave the earth.

    No one would mind if they all had stellar performances and their accomplishments were obvious, but no, they lie, they steal, they cheat, they are arrogant, deceitful and pompous, they live to grow yardfowls only and ignore and refuse to discourse with the people who elect them about the people’s business.

    The electorate must demand better representation. …and accountability regarding distribution of pensions and salaries to ministers, senators and all parliamentarians and civil servants who do no work and only live to serve themselves.

    After all, it’s still the taxpayers who pay them all and always will be.

  20. Adrian Loveridge Avatar
    Adrian Loveridge

    18 cabinet members x average life expectancy of 30 years = over BDS$ 127 million in pension payments by the taxpayer.

  21. David Avatar
    David

    Bear in mind Adrian this covers those in statutory agencies and other SOEs.

  22. David Avatar
    David

    Dr. Robinson reported that there was not breakdown in the T&S figure. Another guarded bit of information?

  23. Watchman Avatar
    Watchman

    As it is, and may continue for sometime, the parasite politicians, will come and go. karma even allowed the people to see the live show of a pitiful looking former PM in the parliament yard

  24. David Avatar
    David

    Also the MPs qualify for pension 17 years before other pubic officers. The pension is taxable. Shouldn’t public officers be concerned about this trivia?

  25. David Avatar
    David

    We are discussing pensions here.

  26. Fractured BLP Avatar
    Fractured BLP

    David

    Pensions are paid after you received a salary over the years !

    You cannot stifle the truth !

  27. Fractured BLP Avatar
    Fractured BLP

    Economic environment is linked to salary and pensions!

  28. Fractured BLP Avatar
    Fractured BLP

    http://www.trinidadexpress.com/20180119/news/trinis-party-on-despite-recession

    Our neighbors have economic challenges also !

    Not only Barbadians as David BU would have us believe !!!

  29. Wily Coyote Avatar
    Wily Coyote

    @Adrian

    Taking into account the thousands OF HIGH PAID LOW WORK civil servants, ministers, board retirees etc. and the future 30 year liabilities are in the BILLIONS.

    My proposal to let the unfunded pension plans collapse make more sense now.

  30. Enuff Avatar
    Enuff

    Fractured
    Trinidad in trouble because like the DLP, Kamla’s government was reckless and all about PR stunts. But Trinidad has a stabilisation fund with USD 5700 million though and gas prices on the up. In our case, Sandals will continue to operate tax free, keep most of their money off-shore and we’ll get departure tax and little spend from the all-inclusive traveller. The RH PR is over!!😜

  31. Watchman Avatar
    Watchman

    Since the parasite MPs made the pension situation unfair , what has change, and how much concerned must john public be ? it seems the 17 years advantage is a curse to them.

  32. Tron Avatar
    Tron

    Wily, agreed.

    We need a total financial default to get rid of all local liabilities. We need a second independence day.

    Otherwise the plantocrats will go on enslaving the Barbadian taxpayer. The local elite, consisting of ministers, judges, high bureaucrats and their families and courtesans are free to move to Panama, Venezuela or Liberia to find new hosts to suck out. The same for all false businessmen wining for the taxpayer´s money.

  33. Fractured BLP Avatar
    Fractured BLP

    Enuff

    Barbados in the current economic straits because of Liz Thompson & Mia Mottley bad development strategies ,

    Here is the clearest example :

    • Greenland. – $ 150 million wasted on a project that cannot be used after 20 years

    Yet tax payers still have to repay the debt up to this day .

    • Dodds prison – $ 700 million used to build this prison when MAM refused to heed advice to improve conditions at Glendairy

    Every January for the next 20 years tax payers have to look for $ 30 million to repay this debt

    Now can you imagine these 2 powderpuff GIRLS…….asking rational thinking Barbadians to return them to office ???

    Listen carefully……..Bajans had ENUFF … of these thieves !!!!

  34. Tron Avatar
    Tron

    Fractured,

    You should also mention Lord Nelson, the Romans, aliens and dinosaurs. Surely, they are also responsible for the present malaise under the blue narrative.

    And do not worry that XY could steal any money from the taxpayer. The country is already drained and impoverised. There is nothing left for theft but shattered dreams and ruins.

  35. Bernard Codrington Avatar
    Bernard Codrington

    @ David at 8 :41 AM

    Are you suggesting that the pension arrangements for ministers and politicians be reviewed going forward from 2018? I thought I was the quintessential optimist on this blog. But maybe Solutions will get a couple of seats if they add it to their manifesto.

  36. Hants Avatar
    Hants

    Politicians should be rewarded for their GOOD performance in service to Barbados.

    How many members of parliament have served the country well ?

    Overpaid. Under performing parliamentarians do not deserve the pensions they are going to collect.

    Barbados is not Brunei.

  37. Enuff Avatar
    Enuff

    Fractured
    Barbados debt didn’t start in 1994-2008. If after 10 years y’all still blaming the BLP for borrowing, notwithstanding wunna borrowed twice as much but with little to show, it is obvious wunna incompetent and need to go. Simple things that don’t require money wunna failed to do–like the promised regular press conferences, transparency etc. Wunna can’t even find candidates, as weeks before an election Todd has to be used to help complete the slate.😂😂 The PR stunting is over.

  38. NorthernObserver Avatar
    NorthernObserver

    “David January 20, 2018 at 7:13 AM #
    Dr. Robinson reported that there was not breakdown in the T&S figure. Another guarded bit of information?”

    What does ‘not breakdown in the T&S figure’ mean?

  39. Bernard Codrington Avatar
    Bernard Codrington

    @ David at 7 :13 AM

    Wearing my accounting hat( I am not a certified accountant) this Transferred and Subsidies line item seems to be akin to the Miscellaneous line item in corporate accounts in which items are hidden that should be disclosed.
    In economics the outliers are hidden in the last element in the linear equation represented by the Greek letter epsilon. If it is too large the reviewer asks for a dis-aggregation.

    To highlight that pensions as a significant contributor to GOB growing expenditure does require verification.

  40. David Avatar
    David

    @NO and Bernard

    Seems a lot of fat in there.

  41. Bernard Codrington Avatar
    Bernard Codrington

    Please substitute” are” for “as” in the last sentence above. EOE.

  42. David Avatar
    David

    @NO

    You should give the Accountant General office a call on Tuesday to seek information on breaking out the T&S number.

  43. NorthernObserver Avatar
    NorthernObserver

    @Blogmaster
    you should know one doesn’t accomplish much ‘on the phone’ in Bim. You have to go and see the people. Likely several times.

    The state of reporting in the public sector is at an all time low. Body after body with 1 annual report in the last 5 years. A few with zero. A few with 2. Almost none with all, the exceptions I have found are Deposit Insurance and Enterprise Growth Fund. The one common factor, is whenever an Annual Report is found, the term “despite the challenging economic conditions” will be found within the first 3 paragraphs.

    This is like throwing darts in the dark.

  44. David Avatar
    David

    @Northern Observer

    Based on utterances from the minister of Finance Chris Sinckler that he is satisfied with the management accounts of the NIS we should not worry about the unavailability of audited financials.

  45. millertheanunnaki Avatar
    millertheanunnaki

    @ David January 20, 2018 at 12:48 PM

    So the external users of financial info ought to rely on the word of a man who is in charge of the country’s finances but who is incapable of telling us the difference between 0.07 and 0.7, either expressed as a percentage or fraction?

    If the management reports are so reliable for decision-making purposes what is so technically ‘constraining’ to be holding up the audited financials other than the too often recurring presence of too many ‘unexplainable’ expenditure / payment transactions in the audit trail.

    When the idiot is able to account for that missing $300 million in foreign reserves since 2013 then people might start taking his utterances with a grain of ‘sweetened’ salt instead of utter contempt.

  46. Lorenzo Avatar
    Lorenzo

    Enuff agreed Fractured Dunceand the Dems do not realise they are the Government as they still behaving like they are in opposition blaming everyone for their incompetence.The Dunce still harping about the prison and Greenland after 10 years in office,my god.I heard a Dem blaming heavy rain in 2016 for the problems on the South Coast.Last Sunday they had a PR show on Brass Tacks with Ms Haigh who is very good at PR and another lady talking about what should not be placed in the sewer but we need to hear from the engineers which I hope Starcom brings probably hosted by Mr Ellis instead of Mr Laynewho enabled those Guests to get away with murder last week.The other Talk show with the three Dems seems to be off the air which is good ,no longer listeners have to put up with loud mouth Mr Lovell or the pompous Dem Ms Holder.The Dems have borrowed twice as much as the Bees yet have not bought ,a Bus or Garbage Truck,so where has this borrowed money gone?

  47. millertheanunnaki Avatar
    millertheanunnaki

    @ Bernard Codrington January 20, 2018 at 12:06 PM #
    “Wearing my accounting hat( I am not a certified accountant) this Transferred and Subsidies line item seems to be akin to the Miscellaneous line item in corporate accounts in which items are hidden that should be disclosed.”

    You might not be wearing a well-known brand of ‘accounting’ hat but you sure do come over as a ‘seasoned’ connoisseur of the intricacies of public finances.

    And it is for that expert ‘inside’ knowledge we would wish you to unravel the below cited circulatory puzzle of a convoluted mystery of public sector pensions funding fabricated by our resident pension expert, the guru @ Hal Austin January 20, 2018 at 5:50 AM:

    “I have re-read it. The principle is the same. If the original pensions came from the Consolidated Fund, there was a cost; if responsibility then is transferred to a statutory body, that cost is transferred.

    The estimated cost of the transfer is then calculated actuarially. It helps to forget the terms Consolidated Fund and statutory organisations. Think that the cost is being transferred from one pension provider to another.
    The calculation is then based on the actuarial metrics.”

    We have been under the ‘mistaken’ impression that the funding of all public sector pensions was a call, either in the first or final analysis, on the Consolidated Fund.
    Where would continuously unprofitable permanently cash-strapped State-operated agencies find the cash flow to provide for pensions other than as transfers from Central Government via the Treasury?

  48. millertheanunnaki Avatar
    millertheanunnaki

    @ Enuff January 20, 2018 at 11:56 AM

    It sounds as if elections are in the air with a similar date to that in 2013.

    Unless the MoF has transmogrified from a pure-bred liar to a financial Houdini of finalizing budgets within a shortened’ time period we cannot see how he can present the mandatory Estimates and have them approved before Parliament comes to its Constitutionally-natural death at the end of the first week of March 2018.

    Clearly, the Estimates for the financial year 2018-2019 must reflect the fiscal adjustments necessary to execute his long overdue recovery plan and to meet IMF expectations.
    These fiscally austere projections certainly cannot be ‘rushed through either at the preparatory or debating level within the short period of the closing window available in the current Parliamentary session.

  49. NorthernObserver Avatar
    NorthernObserver

    @Blogmaster
    you know the line seen in shops….”in God we trust, all others kindly pay in cash”. HIS satisfaction is HIS business, and it should not be ‘in lieu of’.
    How does one explain a body like the National Petroleum Corp of B’dos (a misnomer) which files annual reports from 03-08, and then STOPS http://www.npc.bb/corporate-profile-2/
    The NPC is D.Boyce not the MoF. The condition is endemic. Rampant.
    Caves of Barbados, interesting because Dr JR’s chart shows them getting money in the last 2 years of his spreadsheet….the last report? 2009. and filed in 2015, and they LOST money in both 08 & 09 https://www.barbadosparliament.com/uploads/sittings/attachments/e077abd31a31b901327863b23e6cf6dd.pdf

  50. David Avatar
    David

    @Northern Observer

    Agree, it is endemic read straddling both political parties.

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