In the White Paper on public-sector pension reform tabled in Parliament last week, the Government is proposing that contributions from workers be set at five per cent of their salaries.
Parish councillors and parliamen-tarians will pay six per cent.
To be run as a defined-benefit system, all payments should flow into a segregated fund under trust instead of the Consolidated Fund as originally proposed by the World Bank. Increases to pensioners will be granted whenever the fund can afford it.
The White Paper contains the recommendations of the Joint Select Committee which deliberated on pension reform. It recommended that the retirement age be changed from 60 to 65 under a reformed system to come into effect by April 1, 2016.
Had the five per cent contribution been implemented this fiscal year, collections would approximate J$4.4 billion. However, the pension expenditure is estimated at J$23.1 billion for the year, leaving a deficit of $18.7 billion, said the paper.
implicit pension debt
"The Government should contribute $17 billion per annum for 40 years to fund the implicit pension debt, plus 3.5 per cent of employees' salary for the ongoing service costs," the White Paper said.
Payment of the J$17 billion will come from the Consolidated Fund because, according to the White Paper, the total amount to be paid to new retirees and existing pensioners cannot be funded from new contributions.
The White Paper also said that employees could make voluntary contributions within the provisions of the pension trust fund.
Civil servants who now contribute four per cent of their salaries to the family-benefits scheme will be asked to make an additional contribution of one per cent towards their pensions.
It was not stated whether the family-benefits payments will also be diverted to the new segregated fund. Family-benefit payments are currently paid into the Consolidated Fund as required by law.
Members of the police force who currently contribute 1.7 per cent towards their pensions will be required to contribute an additional 3.3 per cent. Teachers and all other public servants who currently make no contributions will now contribute five per cent of their salaries.
Public-sector workers are expected to start making contributions at a date to be deter-mined by Cabinet.
The paper said the Government will finance, from the Consolidated Fund, the difference between the total contributions and the pension benefits as the need arise. The paper also said the Government is committed to the creation of the segregated fund and will start making contributions as soon as fiscal conditions allow.