Premier Joseph Farrell called the actuary report outlining the state of the Montserrat Social Security Fund (MSSF) “frightening.”
The premier, who is also Minister of Finance was speaking at last week’s Town Hall Meeting on the State of the MSSF, which experts say will be fully depleted by 2025 if measures are not taken immediately.
The Current Dilemma
Kenneth Scotland, Managing Director of the fund, shared during the meeting that the average payouts every 28 days range from XCD$307.65 to XCD1793.00. At the same time the highest monthly contribution is a combined $360 which is 9% of $4000 at which salaries are capped. Employers contribute 5% and 4% from the employee.
It takes at least four maximum contributions to pay one pensioner at the highest rate.
Insurance Actuary Derrick Osborne said during the meeting that if contributions stopped today, the fund could nnot last beyond two years and seven months.
Osborne explained that in 2016, the fund had a $500,000 shortfall. In 2020 the shortfall had risen to $2.7million. More people are qualifying for benefits while contributions have remained flat. The budget for the fund in 2021/22 estimates a $3.9 million deficit.
While the MSSF has $27 million worth of assets primarily in cash bonds and equities, accessing the cash could have disastrous effects on the local financial institutions Bank of Montserrat Ltd. and the St. Patrick’s Cooperative Credit Union. SMSSF has $6.4 milloin in cash in both local institutions. Using these funds to stop the financial bloodshed would affect their liquidity, Osborne said. While the fund has bonds in both Dominica and St. Kitts, these will not mature until 2032.
“We are between a rock and a hard place,” Osborne declared. “That is where we are today.”
He said we can focus on enjoying life now but that would mean in the future, you are unable to receive a pension. It may mean less disposable income now but on the flip side, making changes now “will allow our parents to get a pension but also when we get older to have an income. The longer we take to make these reforms the worse it will get.”
Social Security Fund officials have recommended the following to the Government:
- Inject funds into the SS Fund in the short term to offset increasing deficits
- Eliminate the Early Pension and make 65 the first eligible age
- If the Early Pension is kept, increase the reduction factor so initial pension amount is smaller
- Do not allow those who continue to work to receive a Social Security pension
- No pension increases to those already receiving payments.
- Increase pensionable age to 67
Premier Farrell said his administration in January requested the Foreign and Commonwealth Development Office (FCDO) to make an annual contribution to the fund and expressed the urgency of the need.
“My administration is committed to doing something. Modifying the rates will create a level of hardship now for some people. But it will make things better in the future. The Government of Montserrat is committed to providing some financial support for sustaining the fund. We cannot allow the fund to die. That is not an option. Doing nothing is also not an option,” declared Premier Farrell.
Kenya Lee, Chairman of Social Security Fund said the situation the fund is in today was inevitable after exodus of the population in 1997. Lee said it was “unfortunate thar we find ourselves in situation. There are statutory requirements to operate a fund like this. There must be seperation of powers and duties to function. Management has done its best to curb administration costs and any more changes would be to the detriment of operating the fund.”
Lee said he was pleased that the government is working to take the SSF recommendations on board.
Scotland urged the government to work on two of the actions which did not require money immediately. Change the laws to make 65 the pensionable age and to stop pension increases for those who already are receiving payments.
The premier asked the public to see contributing to the fund not as an expense but “savings and investment for the future.”
He added that for many they will also need to have savings and additional insurance for the future. Some will be reliant on the fund so letting it die was not an option.
Watch the Town Hall Meeting and Q&A Below