BASSETERRE St. Kitts, November 21st 2011 - The 2008 Triennial Actuarial Review of the Social Security Fund points out some significant truths about the Fund that signals a failure on the part of the Board of Directors and by extension the Minister with responsibility for Social Security.
The Report states in its Executive Summary that “Social Security investments continue to be poorly diversified with asset allocations well outside the targeted range established in the Fund’s Investment Policy”.
That abundant truth is a failure of the Board of Directors and the Minister to administer the Fund in accordance with the established policy.
The Actuary breaks down the categories as follows; in fixed deposits- 60%; in Government or Government associated securities and institutions-83%; in one institution-51%; and in local investments-96%.
The fact that 51% of the Fund’s assets are in one institution (National Bank) is a significant problem exacerbated by the fact that Government owes over $1 billion dollars to that same institution. It is further exacerbated by the fact that 83% of the fund is tied up in Government associated entities. This means that Government is using the Social Security as a cash cow. This is a position against which former Minister of Social Security St. John Payne warned when the Fund was established and again at the turn of this century; both times while a Labour Government is in power.
While National Bank continues to rattle up unprecedented profits loaning funds at 11% and 12%, our Social Security that keeps 51% of its funds in that Bank can only muster an average of 6.5%, all of which is eroded by inflation as reported in the Triennial Actuarial Report of 2008.
The Report further states that “while the Fund appears strong, inadequate diversification of investments and the Government’s high Debt to GDP ratio could hamper the funds ability to meet its obligations if future economic shocks impair the ability of Government and National Bank to repay loans deposits and bonds.
The IMF Report tells us of that tale and so we have to look no further to understand that already Government is having difficulty repaying its debts giving rise to the concern expressed by the Actuary.
The Actuary usually takes a long term-view of the Fund and projects for a period of sixty years. The projection shows that the Fund would be depleted by 2043 if things remain the same and earlier if unfavourable conditions are experienced.
This apparent truth has caused the Actuary to recommend that the pension age be increased to 65 with reduced pensions at age 62; a revision of the pension accrual rates over ones career; Increases in the wage ceiling and pensions and diversification of the Fund’s Investment Portfolio to assure the long-term health of the Fund.
Decisions of the Board and Minister therefore, that hamper the Funds ability to maximise returns on assets will do no good for the enhancement of the long-term solvency of the Fund.
It is in that context that we question the decision of the Board to invest without caution in the Beacon Heights Project.
If contributors are to be called upon to pay more and accept less, should not the Board, Minister Condor and our Government exercise prudent conduct in handling the Fund?
Would it not have been a credit to Minister Condor and the Government if a Cabinet decision had been taken to transfer lands to Social Security to carry out that investment to enhance the long-term solvency of the Social Security Fund?
Sad but true our Social Security needs help but Government exploits instead.
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