Wed | Jun 3, 2020

Early retirement, part of plan to cut public sector wage bill

Published:Tuesday | March 28, 2017 | 6:52 PMEdmond Campbell

Prime Minister Andrew Holness has said the early retirement scheme to be offered to public-sector workers effective April 1, 2017 over a one-year period is part of the administration's efforts to cut the oversize state wage bill.

A projected wage-to-GDP of nine per cent by 2018-2019 is a structural benchmark under Jamaica's standby agreement with the International Monetary Fund (IMF).

Holness told his parliamentary colleagues yesterday, while debating the pensions bill, that the administration was not pushing to pass the legislation to please the IMF but to secure Jamaica.

"Every time we have to do something that is urgent, we want to use the IMF as an excuse because we have to pass IMF tests. We must mature to the point where we can recognise clear and present danger and act as an independent Parliament in our own best interest," said Holness.

Emphasising the importance of passing the proposed law, the prime minister said the public pension expenditure increased from 0.4 per cent of GDP in 1990 to a projected two per cent of GDP for the upcoming new fiscal year.

"If it continues to increase at this rate, there is no question that the time where we would not be able to meet the pension is not far away but closer than we think.

"It behoves the House to act responsibly with this bill," said Holness, adding that "there is no room for politics around this bill."

Opposition wants more specifics on pensions segregated fund

Opposition spokesman on Finance Dr Peter Phillips has raised questions about the absence of a timeline for the establishment of a segregated fund in the Pensions (Public Service) Act.

In his contribution to debate in Parliament of the proposed law, Phillips also pointed out that there was no indication of a timetable when the Government would make its contribution to the fund.

According to Phillips, under the current system, public-sector workers have a constitutional guarantee that their pensions would be paid into the Consolidated Fund. "What you are asking them now to do is to accept that in the future the Government will pay some amount. What amount? We don't know."

However, Prime Minister Andrew Holness, who also contributed to the debate, said he could not argue with the point that workers want to ensure that their pensions are secure and are not at the "mercy of a capricious government".

According to the prime minister when the fund is established the Government's payment obligations would increase immediately. "Overnight, your fiscal obligations change," said Holness. He said the Government will respond to these concerns before the debate on the bill ends in Gordon House.

Holness accepted a recommendation by Phillips that the Government would carry out an 18-month review instead of the three years proposed in the bill.