The Chamber of Commerce’s chief executive says he is “baffled” at the government’s failure to reform public sector pensions by making civil servants contribute towards their own retirement costs.

Jeffrey Beckles, speaking on a webinar hosted by the Chartered Financial Analyst (CFA) Society of The Bahamas, said: “I can’t find a model in the world that has been using the same system where it has proven successful or profitable, and I don’t know what causes us to feel that we will be the first country to maintain it and be successful.

“So I believe that the time has passed and, certainly with urgency, we must move to change it towards a contributory one. The time is now.” The government is well aware of the “ticking time bomb” that unfunded civil service pensions represent for both its financial sustainability and that of the country, given that the issue has been identified by multiple observers as a major weakness for years.

The International Monetary Fund (IMF), as recently as its 2018 Article IV report on The Bahamas, warned that the current system – where civil servants contribute nothing to funding their retirement – is “unsustainable”.

The Washington DC-based fund listed civil service pensions, together with the public sector’s wage bill and loss-making state-owned enterprises (SOEs), as three key reforms that the government must target if it is to reverse The Bahamas’ fiscal decline – and that was before both Hurricane Dorian and the COVID-19 pandemic.

“The civil servants’ pension system is unsustainable,” the IMF warned two years’ ago. “Government employees draw pensions at retirement without contributing to the system while employed. Staff analysis in the 2016 Article IV Staff report noted that accrued government pension liabilities totaled $1.5bn in 2012, and would rise to $3.7bn by 2030 as the population ages.”

The IMF called for reforms that involve “moving to a contributory regime in the near term, and to a defined-contribution scheme in the medium-term”. This would require civil servants to contribute a portion of their salary to funding their retirement, rather than having this financed 100 percent by the taxpayer through the budget – as is done currently.

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