Government had to reform Fiji’s only superannuation fund the Fiji National Provident Fund in order to safeguard the future retirement funds of those who are young working members.
Attorney-General Aiyaz Sayed-Khaiyum once again had to explain the Fund’s status in Parliament after SODELPA Member of Parliament Viliame Gavoka questioned whether Government would ‘make up’ to those pensioners whose pension rates were reduced.
Mr Sayed-Khaiyum reminded the House why Government had to take bold steps to reform the Fund and what would have happened if changes had not been made.
He informed them, once again, that there were firm warnings by the World Bank, International Monetary Fund, International Labour Organisation, and actuary firm Mercer Australia that the Fund was headed for peril.
In fact, financial and actuarial experts stated that under the old scheme, the FNPF would have run out of its reserves by 2023 and would have exhausted all its assets by 2056.
Mr Sayed-Khaiyum told the House that every youth who is working today and is contributing to the FNPF would have had nothing left in the FNPF when they retired.
He explained that pensioners were getting as much as 25 per cent returns, meaning in four years they had already received all the money they had put in the FNPF and from the fifth year, money of younger members would have been paid, leaving the younger members with nothing.
He explained that this would have been a financial disaster for Fiji.
Before the Government reformed FNPF and put a stop on the payment of 25 per cent to pensioners, the Fund was headed towards a crisis.
- The annual accounts for 2007 and 2008 were qualified by the auditors because proper books of accounts were not kept.
- There was no solvency requirements and actuarial certification made.
- In 2009, $327 million worth of investments were impaired by the FNPF. What it means is that the actual value of investment assets were overstated in FNPF’s books.
Despite his reasoning and explanation that steps were taken to safeguard the younger generation of Fijians, SODELPA MPs kept on pushing for a change to give a bigger slice of the pie to pensioners who were receiving a hefty return prior to the reforms.
The Fund at a glance:
- Net profit increased to $359 million from $331 million in 2016 attributable to better investment returns.
- From this profit, $270 million was credited to members’ accounts in 2017 equivalent to 6.35 per cent in interest paid.
- The Fund has credited over $1 billion to its members in the last five years.
- Record contributions of $546 million from $480 million in 2016 is the result of better compliance through automation.
- Total assets of the FNPF now stands at $5.7 billion, which is more than sufficient to cover its liabilities of $4.8 billion.
- Net assets are now $836 million.
After applying the solvency requirement of 10 per cent, there is still a surplus of $276 million.
- This is a major improvement from the negative $337 million in 2010 prior to the reforms.
- The Fund also completed the 250-room Fiji Marriott Resort in Momi Bay, which was opened by the Prime Minister in April.
- Total Government bonds as a per cent of FNPF’s total assets has come down from 56 per cent in 2010 to 41 per cent in 2017.