PHILIPSBURG–The St. Maarten Consumer Coalition and Anti-Poverty Platform say it is “erroneous” to believe that government workers will end up with more pension at the end of the month under the proposed average pay system contained in the draft National Ordinance for the Revision of the Pension of Civil Servants, which was discussed during a public plenary session of parliament last Friday.
“First of all, in the new pension system, an average pay system of the whole civil servant’s career was introduced because the final pay system based on the salary of the last two years was considered unsustainable for the fund,” the Coalition said. “The new average pay system will lower the cost of the pension fund.
“The second reason why civil servants cannot get a higher pension is that government was not complying with its legal obligation to pay the 18 per cent premium contribution on each civil servant’s salary to the APS [General Pension Fund – Ed.].
“As a matter of fact, the draft ordinance is even proposing for government to reduce its premium contribution as employer from 18 per cent to 10 per cent of the civil servants’ and teachers’ salaries. So, if the fund receives less money to invest, how can the system give more pension to the civil servants and teachers?”
According to the Coalition and the Platform, the increase in the retirement age from 62 to 65 will also not benefit civil servants and teachers. “By not starting to pay the pension at age 62, and by postponing the pay until the civil servant reaches age 65, is a way to keep money and to prolong contributions to the fund.
“What will the civil servant get back in return if they do not pass away before they reach age 65? So-called flexibility is given to the civil servant if you want to retire earlier than 65 – you can get a reduced pension (so you are being penalised for not contributing longer in the fund) and those who stay longer get a little more pension.
“Let it be very clear that the new pension ordinance forces all civil servants, regardless which pension arrangement they were entitled to when they entered the fund, to go over into the new system to keep the fund sustainable. The covenant signed with the civil servants’ unions [in] the [consultative body for issues related to civil servants] GOA has been used as an argument to force every civil servant to give up their former pension rights and to go over into the new pension system.”
The Coalition and Platform said United Democrats Member of Parliament (MP) Dr. Luc Mercelina had presented some serious concerns about the proposal to “force” every civil servant to give up their old pension rights and to go over into this new pension system which will result in a reduction or a cut in the pension benefit for most civil servants.
“MP Mercelina even mentioned the court case that was won by the civil servants’ union and heads of departments. The government of the Netherlands Antilles wanted to introduce the average pay system for all civil servants in 1997, but had to respect the rights of the civil servants to protection of their property – according to Article 1 of Protocol number 1 of the European Union Human Rights Treaty, a property that you accumulate and cannot be taken away.
“MP Mercelina therefore asked how many civil servants still have such acquired pension rights? He also cautioned not to force these civil servants, because they will win a court case based upon the jurisprudence, but to provide them with a voluntary option to step over into the new pension system.
“All civil servants and teachers are following the discussions in Parliament with much interest and are hoping that the parliamentarians will instruct the government to respect their acquired pension rights and to look for ways to comply with the pension rights of the public workers.”
The key differences between the current end-pay system in which the pension is calculated based on the last salary of a worker and the proposed average-pay system where the pension will be based on an average of the worker’s salary for their entire civil service career was outlined during the parliament meeting.
For the current final-pay system, the worker’s last salary serves as starting point for the pension accrual and each year the accrued pension is adapted to the most recent pension base as if this applied throughout the entire service career. Also, the cost of the final-pay system is high, which makes it unsustainable and there is automatic indexation until the retirement date.
In the average-pay system, the salary of each year serves as a starting point for the pension accrual and the accrued pension is the sum of the annual accrual. Also, the pension is possibly increased with indexation.
Examples were provided to show pensioners taking home more funds in the proposed new pay system.