July 4, 2014 at 11:50 a.m.

No surprise about government pensions

Civil servants should be upset, but the blame lies with Paula Cox, not Bob Richards
No surprise about government pensions
No surprise about government pensions

By Bob Stewart- | Comments: 0 | Leave a comment

The announcement by Government earlier this week to the effect that former public servants would not be compensated for the increase that has taken place in the cost of living index was not welcomed.   

This means that civil servants pensions have been reduced.   

Of course, it is not just civil servants — it includes teachers, police and prison officers, nurses and others on the government payroll. 

This miserable state of affairs has arisen largely because government pension funds have not been properly funded — that is to say, there are insufficient assets available to meet the liability of meeting the pension payroll.   

No cash

It is a bit like saying that your boss in unable to pay your wages this week because there is not sufficient cash.

Although the announcement must have shocked many former government employees, it should not have been a surprise, and it certainly was not a surprise to me.   

I have written many times that government pension funds have many of the attributes of a Ponzi scheme — the sort of financial arrangement that landed Bernie Madoff a term of life imprisonment in a US penitentiary a few years ago.  

As far back as 2003, I made a speech at the Hamilton Rotary Club drawing attention to this issue (or more accurately this fraud) stating that the Government schemes were heading for trouble unless serious steps were taken to correct the financial shortfall.   

The then-Finance Minister, Paula Cox, according to the Royal Gazette, took me to task by stating that I “may have created an overly negative impression of the state and future viability of the Contributory Pension Fund”.

As events are now showing, it was not me that put the viability of government pension funds at risk but the former Finance Minister and it is now left to the current Finance Minister, Bob Richards, to clear up the mess.    

Incompetence

It also means that current retirees are paying the price for the incompetence, and misleading statements, of the former Finance Minister.

Undoubtedly, there will be, rightly, squeals of financial pain from retirees but I rather suspect blame will be laid on the shoulders of Mr Richards and not those of Ms Cox.

In the May 29, 2003 Royal Gazette, the former minister asserted in a headline that “Pension Scheme safe with us”.  

She continued that “Government wishes to assure existing pensioners, and those who are due to receive CPF pension benefits in the near future, that the Fund is in good shape and is able to meet its obligations.”    

Well, I hope those innocents who have been short-changed in 2014 feel the same way.

The recent SAGE Commission Report also drew attention to the dire straits of government pension funds, including the Social Security Fund, on which so many seniors currently rely.   

Although cost of living increases will continue to be paid to seniors it is, in my opinion, just a matter of time before government has to admit that it cannot maintain current benefits.   

One of the main reasons why this issue has not surfaced before, despite many others having drawn attention to the financial mismanagement that has characterized government stewardship of public retirement funds, is that the subject is difficult to understand and that explanations about funding ratios, cost of living increases and having sufficient assets available to meet future liabilities are not easily put over on television news. 

Hoodwink

Politicians know this and are therefore able to hoodwink the public, believing that their transgressions will not come to light until after they have left office.   And they are, of course, dead right.  

Most voters don’t know and don’t care. Politicians do know but don’t care.    

Who will remember what a former Finance Minister said 11 years ago?

Some years ago a famous American politician, Senator Jesse Helms of North Carolina, is reputed to have said “Sometimes you gotta feed the goats — gotta give ’em goat food.”  

Well some years ago the Bermuda electorate was given goat food by the then-Finance Minister and they lapped it up. 

Bob Stewart wrote the book Bermuda: An economy which works.


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