Reform urgent as 2023 pension bill totals $75 million

The reform of the existing public service pension plan has been promised again as the government of St. Vincent and the Grenadines (SVG) is expected to spend $75.4 million on pensions in 2023.

Minister of Finance, Camillo Gonsalves told the House of Assembly during last Tuesday’s presentation of the Estimates of Revenue and Expenditure for the 2023 fiscal year that pension continues to be one of the “more significant items of the recurrent expenditure in 2023”.

Pensions amount to $60.3 million of the $ 974.3 million in the 2023 Recurrent expenditure budget. Under the Compensation of employees, which totals $373.8 million, employer’s National Insurance contributions (NIS) amounts to $15.1 million.

“The future burden of the government pension plan would be substantial as the government is the largest employer in the country and pension promises in the public sector is relatively generous and future payments have to be made directly from government’s revenue,” the Minister pointed out.

He reiterated comments made by the Director of the National Insurance Services (NIS), Stewart Haynes during a media consultation in November, noting that the current public sector pension system is “fiscally unsustainable”.

Under the current pension system civil servants receive benefits amounting to 127 per cent of the salary they received upon retirement- 60 percent of NIS benefits and 67 per cent of the annual entitlement.

“In an era when those in the private sector have seen their pension provisions decrease, pensions in SVG’s public sector continue to look generous. He [Stuart] made the point that the NIS is now unsustainable in the medium and long term if no reforms are made and further that pension reforms must be done by 2024 or “draconian measures” may be applied.”

Minister Gonsalves emphasized the need to “act now” on the issue of reform, adding that in the 2023 budget “reform would be high on the government’s agenda and we intend to commence discussions on the issue with the various stakeholders in the upcoming fiscal year.”

In 2019, the Finance Minister had said that a Pension Reform Steering Committee would be established to tackle the issue.