Thursday, May 26, 2011

FNPF Spells out Pension Fund Collapse


By Tevita Vuibau 


The Fiji National Provident Fund (FNPF) will collapse by 2056 if efforts to reform the pension scheme are not made.

Speaking to pensioners about the FNPF’s plan to reduce pension interest rates, FNPF trustee Alipate Waqairawai (left above picture) said that multiple reviews of the FNPF had identified weaknesses within the fund.

“In 1992 the International Labour organization (ILO) recommended to reduce the interest rates given to sole pension members from 25 per cent to 10 per cent as the 25 per cent was too generous.”

“Again in 2000 there were multiple reviews identifying weaknesses, by the ILO, World Bank, International Monetary Fund, Financial Sector Assessment Programme (FSAP), Actuaries, auditors and other commentators,” said Waqairawai.

“In 2008 pension rates were maintained at 15 per cent for sole pensioners and 11 per cent for joint members.”

Waqairawai said that if the FNPF managed to charge 6.5 per cent interest on its investments the proposed reviews would place pension rates for single pensioners at 8.8 per cent if they retired between the ages of 55-59, 9.8 per cent if they retired between 60-64 and 11.6 per cent if they retired after the age of 65

He added that the joint pensioners would have their rates at 7.4 per cent if they retired between the ages of 55-59, 8.1 per cent if they retired between 60-64 and 8.8 per cent if they retired after the age of 65

Waqairawai said that a large part of the FNPF’s investment portfolio was in government bonds.

We have term deposits of $217.65m, Cash 41.76m, Government bonds of $1.97b
, Fixed interest securities of $356.42m, Loans of $466.40m, shares of $329.47m and investment properties of $84.68m.

“We get most of our interest from the $1.97B that we have in government bonds and government has never defaulted on any payment.”

Waqairawai said that FNPF was not living within its means and that drastic changes needed to be made to ensure that FNPF was able to meet the needs of it pensioners.

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