There are various types of pension arrangements for Government workers, ranging from the non-contributory "Pay-As-You-Go" (PAYG) schemes, to the partially and fully funded pension plans. The majority of government workers are part of non-funded Pay-As-You-Go schemes, and are paid their pensions out of the Consolidated Fund.
There are many advantages and disadvantages of the current system. The good features include: the facility to be retired on permanent ill-health, subject to receipt of acceptable medical certification; retirement income for life, with facility of partial commutation of lifetime benefit for a single cash lump-sum; and favorable treatment of mixed service with the same employer but in different categories of work.
However, certain features of the current pension system are undesirable or cumbersome. These include: the fact that pensions are not a right, but are awarded by grace of the Governor General; the inordinate delay between the last salary cheque and first pension cheque; the inequitable variations in pension formulae for large groups like teachers and public officers (civil servants and nurses); and the fact that employees and the public do not understand the pension system.
The planned reforms seek to correct these problems, while at the same time ensuring that the favorable features that currently exist are not lost. In so doing, it is now desirable to rationalize the large number of schemes currently existing, and to take the opportunity to create funded schemes dedicated solely to the provision of pensions and related benefits to public servants.
This will involve the following:
Associated with the creation of visible pension funds for public servants, are a number of benefits not previously enjoyed by government workers. These are outlined below:
Public servants will now be able to see exactly where their fortunes lie. They will be able to critically examine the investment and administration of the funds, and have an input as to how they are operated. Furthermore, with the planned enforcement of information requirements similar to those to be implemented in the private sector, public servants will be kept abreast of their entitlement and rights.
With the establishment of dedicated funds, the proper investment of these funds can produce surpluses, which can be used to increase pension benefits to be made to the retired public servants.
- Dedicated funds are sources for post-retirement indexation of pensions.
- Administrative improvements in the Ministry of Finance and Planning will be a feature of the planned reforms, and will ensure that the delays in calculating and making payment of pension benefits to public sector retirees and other beneficiaries are significantly reduced.
- In keeping with the principle of equity, and in seeking to ensure that public servants accumulate sufficient resources for their retirement, the preservation of deferred entitlement as applies to the occupational pension and superannuation schemes will be extended to the public servants' funded schemes.
- The Government will preserve the acquired rights under the Pay-As-You-Go Schemes in respect of service, up to the date of the change.
Also associated with the creation of funded schemes for public servants, are changes in the funding arrangements. Large categories of workers will move from being participants in non-contributory schemes to a situation wherein all public servants will contribute, by salary deductions, towards funding their pension.
There are important implicit and explicit benefits of this arrangement, as are outlined below:
- Requiring public servants to contribute toward their pension will automatically heighten their awareness of the need for preparing for retirement. They will now have a vested interest in ensuring that the funds are properly managed, and will probably be encouraged to make additional arrangements for their retirement; and
- Pension Funds will grow and will therefore be a source of greater investments and benefits.
Transitional Arrangements re: The Creation of Funded Schemes for Public Servants
These reforms will be achieved on a phased basis, allowing previously employed staff the option of contributing, while all new employees will be required to contribute as a condition of employment in the Public Service.
During the period of transition and under the existing pension laws for the public sector, the Government should continue to provide and guarantee the accrued pensions payable to retired public servants.