Save For Your Pension

Armand Hessels wrote an article titled Shameless, under which he described the callous, heartless handling of pension funds, across the aisle, MEP & AVP, each in their turn our ruling parties deliberately played with retirement age as an election promise, lowering then increasing, and deliberately, shamelessly, used the funds for political purposes.

Pension is important. I now know.

I could have never said that earlier in life. I never gave my pension a single thought, then BINGO, I reached pension age, and was handed about Awg 1,000 a month, courtesy of GOA, which I am grateful for, but without other sources of income, this would have sentenced me to the poor house.

Fact: Young people never think about retirement. Correction, only very few do.

A while ago in conversation with an accountant servicing medium and small companies on the island he helped me see why existing pension funds only serve the government, not the client.

We sign up, we pay a small fee, our employer kicks in a bit, then the fund writes 10% or 15% off the top for expenses, executive cars for its directors, fancy digs, business lunches, and makes the money available to the government in the form of interest bearing loans, enriching the fund, and teaching the government to be wasteful, since there is always a source of cheap money, willing and able to lend.

It would benefit employees if their employer found a better way to simply save, put the money away, long term, and accrue interest. This strategy would yield more for the little man who worked all his life in the trenches.

In general, an incentive to save would behoove us as a nation and as individuals, be less wasteful.

What Armand says:

Both AVP and MEP have started their election campaign, recently. AVP, pulled its hollow leader out of moth balls, and he is now masquerading as the champion of the elderly, what Armand calls: The height of hypocrisy!

Pensions, he says, played an important role during several election campaign. After the pension fund was established in 1960, with 65 as retirement age, it was lowered to 62 in 1975. In 1992 MEP lowered retirement age further to 60 years, and in 1993 increased pension benefits by 40%. This was done in spite of serious warnings from policy advisers who foresaw major problems for the fund.

AVP won in 1994 partly thanks to its promise to double the original pension benefits. However, the modest premium increase turned out completely inadequate. That is why both SVB and KPMG urgently advised against the plans. These warning were completely ignored by the then MinPres, claiming he didn’t see any report.

Despite warnings from the Acting Director of Finance, the Director of SVB and even the International Labor Organization (ILO), GOA was deaf to protests, and in 2008 it turned out that the accumulated SVB capital of Awg 350M, had already been halved.

The SVB deficit already reached Awg 9M, but climbed to Awg 20M in 2009, Awg 30M in 2011 and Awg 100M in 2016. The premiums collected were not enough to cover the premiums paid out. The almost bankrupt GOA had to supplement the deficits by law, but failed to do so. GOA simply did not comply with its legal obligation to provide legal reserves for the fund.

In 2008/9, the MEP government made attempts to raise retirement age, but was torpedoed by AVP. Then AVP confronted that same reality, when taking over in 2009. They had no choice but to raise retirement age to the original 65, thus forced to retract an irresponsible electoral promise, after first emptying the fund completely.

More tomorrow

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March 16, 2021
Rona Coster