Prominent economist Professor Wadan Narsey has challenged the recent public statement by the Fiji National Provident Fund (FNPF), stating that a historic Pension Buffer Fund (PBF) holds sufficient capital to restore the pensions cut during the 2012 restructuring.
Prof Narsey said the PBF was established by the Fiji parliament in 1975 specifically to finance retirement annuities.
He said the Fund was supported by a two-cent contribution injection from members until 2000, when parliament halted the mechanism because the Fund had become self-sufficient.
According to data compiled by Professor Narsey and the late Jackson Mar, the PBF would have grown if properly maintained with credited interest from 1975.
“Paying all the pensions, receiving all the lump sums of new pensioners, and crediting the PBF annually with interest, the PBF would have amounted to $903 million by 2012, far more than ever needed to pay all pensions owing then (estimated by FNPF actuaries to be around $500m then) and into the future,” Prof Narsey claimed in his article responding to the FNPF’s statement published earlier this month.
“By 2025, it would have amounted to a massive $1,476 million (yes, more than $1.4 billion), far more than needed to pay all the pension obligations, with huge amounts left over.”
Prof Narsey reported that FNPF management ceased crediting the PBF with interest, which resulted in the reduction of balances from 2005 to 2011 before renaming the account and absorbing the funds into general reserves.
He claimed those reserves had since been utilised by general members.
“So the historical fact is that the funds allocated by Fiji parliament to the Pension Buffer Fund have been used by the General Members all this time, contrary to the claims in the recent two-page articles by FNPF.”
Meanwhile, Prof Narsey also highlighted in his article that 98 per cent of FNPF members currently opt for full lump-sum cash withdrawals at age 55 rather than selecting the fund’s pension annuity option.
He attributed this rate directly to a drop in public trust following the 2012 pension adjustments.
While acknowledging that some historical pension annuity rates reaching 25 per cent in 1999 were unsustainably high, Prof Narsey noted that he had formally submitted a compromise proposal to the FNPF Board, the Minister of Finance, and the Prime Minister.
The proposal outlines a monthly pension cap of $5000 alongside the full restoration of low-income pensions.
n Full article on Pages 34-35
