In a damning indictment of St. Kitts and Nevis Social Security, the actuaries in a report dated May 2, 2013 wrote, “Social Security continues to be a very inefficiently run organization with almost 18% of contribution income, or 2% of insurable wages, going towards operating expenses. Approximately two-thirds of operating costs are staff related. When compared with other social security schemes in the region, both the staff count and operating costs are high.” p12.
Concerns have been expressed that, “In spite of previous recommendations to diversify the invest portfolio across different geographic locations, asset types, issuers and sectors, no significant changes have been made in this regard.” p5
Dr Harris argued that given the importance of social security as an institution holding people’s money in trust, and given that Social Security has over three quarters of a billion dollars in National Bank, and given the fact that the said Actuarial Report calls for 50 percent of Social Security deposits to be removed from the National Bank, there was a clear public policy interest in addressing such a significant report which if the recommendations were implemented would seriously undermined the National Bank and the stability of our country.
The actuaries recommended immediate steps should be taken to diversify fund assets. “Two specific goals should be to reduce by at least 50% over the next 5 years the portion held in National Bank and increase the portion of assets held overseas as high as 20 percent over the next 10 years.” pv
Dr Harris said, the Social Security Fund was badly managed, overstaffed, and was improperly investing Social Security money. The actuaries were concerned that the Beacon Heights Project was not performing. “The Beacon Project is also another significant investment project of the Board. Infrastructure work of the project has been completed and nine of the ten model houses have been pre-sold as of the writing of this report. Going forward, the Board is advised to actively market the project and avoid allocating funds for further housing development. The Board can consider adopting the pre-sale process and utilize monies from prospective investors to construct additional houses. A detailed cost benefit analysis (including a capital appraisal) should be done for a project of this magnitude.”p6
Among the main findings of the actuaries are that, “The minimum pension, however, is slightly low relative to average wages and cost of living. The continued heavy concentration of investments in one commercial bank and almost all assets domiciled in St. Kitts and Nevis makes the portfolio extremely high risk. High administration costs continue to be a challenge for the Fund.”
Additional findings include:
1. Contribution income will be sufficient to meet expenditure until between 2013 and 2016.
2. Total expenditure will first exceed total income between 2014 and 2030
3. The fund will be depleted between 2038 and 2044.
4. The pay-as-you-go rate, or the rate required to produce just enough contribution income to meet total expenditure when the Fund is depleted will be between 26 percent and 28.4 percent.
5. The pay as you go rate in 2071 will be 26 percent and 35 percent.
These results indicate that the Fund, while not financially sustainable over the long-term at current benefit provisions and contribution rate, remains adequately funded for the short and medium terms. These results are slightly less favourable than those of the 9th Actuarial Review, “when reforms designed to enhance long-term sustainability are continuously deferred, the adjustments required when reforms are eventually made will need to be drastic and painful to both contributors and beneficiaries in order to materially impact sustainability” p7.
The actuaries drew attention to the bad effect of politics at the Board level. “A very influential but often invisible contributor to the state of public sector is political interference and the failure to adopt and follow good governance practices. Over many years poor governance practices have led to excessive staff count, poor investment diversification and the failure to adequately disclose key reports that outline the state of the Fund.” p37
Our citizens, the IMF, World Bank, European Union and other entities are concerned over the lack of transparency, good governance by the Douglas regime. Rather than elevating their standards of behaviour, conduct and transparency the Douglas regime has kept their standards low and have kept vital information from the public. Team Unity will bring government into the sunshine. It will introduce freedom of Information Act and Integrity in Public Life to eradicate the corruption associated with the Douglas regime.
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