THE HAGUE/PHILIPSBURG–The Committee for Financial Supervision CFT is critical of the decision of the St. Maarten Government to retroactively adapt the pension premium for civil servants. This move has an adverse effect on the coverage ratio of the local pension fund APS, warned the CFT.
According to the CFT, Government’s unilateral decision to lower the pension premium for its civil servants from 25 per cent to 22 per cent retroactively has resulted in an amount of some NAf. 20 million that lacks coverage in the approved 2016 budget.
The St. Maarten Government has provided an overview with a “realistic solution” for the NAf. 191.6 million in payment arrears, with the exception of a post of NAf. 20 million, an amount that concerns the premium discrepancy between 22 per cent and 25 per cent over the period October 10, 2010, to late 2015.
“The CFT is questioning this choice. On the one hand because of the legal feasibility of the retroactive adaptation of the premium and on the other hand because of the effects on the coverage ratio of the APS,” CFT Chairman Age Bakker stated in a recent letter to St. Maarten Finance Minister Richard Gibson.
“The measure has an adverse effect on the coverage ratio of the APS. Since this coverage ratio is already below the 100 per cent at this moment, the CFT advises Government to take measures to sufficiently restore the coverage ratio,” stated Bakker in the letter, dated April 14 and published on the CFT website this week.
The CFT has identified the pension premium for civil servants and the related coverage ratio of the APS as a point of concern. “The fund’s coverage ratio is a source of concern for the CFT because it is already below 100 per cent. As a result, there are insufficient available funds to comply with all future obligations of the APS.”
The future revision/reform of the pension system, an issue that is still under negotiation, will also affect the APS coverage ratio. “The result of the negotiations on this new pension system will have a great influence on the coverage ratio of the APS and possibly even the remittance to the fund.”
The negotiations to revise the pension system should be concluded and the new system implemented before the end of this year in order for St. Maarten to comply with one of the four points of the instruction issued by the Kingdom Council of Ministers on September 8, 2015.
St. Maarten has sufficiently complied with the other three points of the instruction: the compensation of the shortages of the past years in the 2016 budget, the complete incorporating of the health care and old age pension provisions in the 2016 budget, and the providing of a realistic solution for the payment arrears.
The CFT concluded that in principle the approved 2016 budget complied with the norms of the Kingdom Law Financial Supervision, as well as the first three points of the instruction of the Kingdom Government, but with “some marginal comments.” For that reason, the CFT considered it justified for St. Maarten to be cautious in contracting new loans.
Contracting capital loans has become possible again now that St. Maarten has complied with the majority of the points of the instruction. The Kingdom Council of Ministers took a decision to that effect last month.
The CFT complimented St. Maarten and its Finance Minister for accomplishing a “considerable improvement.” “A clear effort has been made to present a balanced budget which also complies with the points from the instruction,” stated Bakker in his letter. The CFT did indicate that it will keep a close tab on the (limited) financial risks of the 2016 budget.
Source: Daily Herald
CFT wary of pension premium adaptation