Actuarial firm: Staff Union proposals would see substantially increased benefits

As far back as September 18, 2002, actuarial consultants, Bacon, Woodrow & de Souza, warned Caroni Chairman Kusha Harracksingh about the “substantially increased benefits” for all current active members of the Staff Pension Fund On August 26, according to documents, Harracksingh, had shown the actuaries a set of proposals for benefit improvements in the Staff Plan that had been formulated by the Staff Unions. Those increased benefits, said partner the firm’s partner, TP Kimpton, would have “absorbed most if not all of the surplus disclosed by the actuarial valuation. The proposals suffered from major deficiencies, the actuarial firm said.

The following are their comments :
a)They were drawn up in the expectation of an imminent VSEP exercise in order to deliver enhanced VSEP pensions. However, the proposal would result in the same enhanced benefits being available for staff retained after a VSEP.  This is inefficient and expensive — a VSEP as a one-off exercice that provides enhanced benefits only to those persons leaving under VSEP so that the outgoing design of the plan remains unchanged.
b)The proposals would have produced a pension plan considerably more generous and hence expensive — than is typical in the market.
c)The proposals would have done nothing for existing pensioners who have all been on fixed pensions being eroded by inflation ever since they retired. If surplus is to be used to finance benefit improvements we would expect pension increases to be one of the first items to be considered.

But in a set of proposals submitted to the Ministry of Agriculture on August 22 by the Staff Unions, the actuaries noted that these were “substantially more generous” and the potential cost of these proposed benefit enhancements as several hundred million dollars, many times the level of surplus in the Staff Plan. The actuarial firm also noted that as far as active members are concerned, “from a purely pensions perspective the Staff Plan’s benefits are fairly good and it is probably difficult to justify any improvements other than to the ancillary benefits.