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Commission on the Pension and Pension Administration Reform
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Most countries across the world have supported the adoption of three-tier retirement systems: a mandatory publicly managed social security system; a privately managed occupational scheme as a second tier; and voluntary savings as a third tier. The aim of these three-tier systems is to provide stable, predictable and adequate income security throughout retirement. Governments in the ECCU should also strive to create coherent, efficient and effective layers of public and private protection.

In the context of the increasingly complex retirement issues and the challenges of managing ECCU economies in turbulent times, it was recommended that the Monetary Council establish a Commission on Pension and Pension Administration Reform to review and make recommendations to achieve the goals of stable, predictable and adequate income security throughout retirement.



Background
Public Pensions
Private Pensions

Terms of Reference
Role of the Commission
Composition and Meetings
Operations of the Commission
Institutional Support for the Commission
Role of Research Staff and Administrative Assistant

Background
The Commission is concerned with the second tier of occupational pension plans, both those of government (the public officers pension plan) and those employer sponsored plans in the private sector (including those sponsored by statutory bodies).

Countries in the ECCU are faced with rising expenditures to meet government pension liabilities, uncertainties as to the viability of private pension plans, and inequities in coverage, all at a time when life expectancies are increasing and numbers in the cohorts, both of retired persons and of those approaching retirement, are increasing. There is an urgent need to address these issues both from the viewpoint of governments, faced with regulatory, sustainability and equity issues, and from the viewpoint of pensioners and prospective pensioners who are concerned about facing futures without the guarantee of adequate pensions. top ^

Public Pensions
Most countries in the ECCU have public officers pension schemes which are non-contributory and operate on an unfunded basis. All pensions and gratuities are charged to the government budgets as current expenditure and budgeted accordingly in each financial year. The relative cost of such schemes tend to increase steadily and might ultimately reach rather high levels which could impair government finances, particularly if the schemes have liberal benefit provisions in force. In addition to the potential for the schemes becoming insolvent and forcing drastic curtailment of their benefit provisions, rising costs will mean a reduction of funds available for governments to finance public programmes of higher priority such as education and public health.

In some ECCU countries there is no attempt to integrate or coordinate pension provisions between the national social security pension systems and the government pension scheme. This essentially imposes a double burden on public finances, since government contributes to the social security pension (as employer) and entirely funds the public service pension. In fact, the joint pensions could exceed by far the replacement ratio affordable by industrialized countries. In our societies where a large number of persons have no pension entitlement at all, this is untenable. A well designed occupational pension scheme should take into account the benefits of the national social security system to attain adequate levels of joint pensions aiming at a replacement ratio that ensures a basic economic security after retirement from active employment.

In one member territory, Anguilla, a rationalization of the pension scheme for public officers effective 1 January 2004 has accomplished significant improvements, including a reduction in accumulated actuarial liabilities due to the deferment of the normal retirement age, the reduction in the pension formula, and contributions made by Government (as employer) and public officers.
In the absence of reforms, the former pension scheme would have been unsustainable in financial terms to the government, and would have required drastic curtailment to the benefit provisions in the future. top ^

Private Pensions
Across the ECCU, there is an insufficiency of regulatory provisions governing private pensions and some persons who have looked forward to pensions from their employers face uncertainty in retirement because of the failure of those pension plans or the disappearance of the plan sponsor, their employer. This has consequences both for the governments and for the national social security systems which might be forced to provide for these individuals in the event of such failure.

Only governments can take the initiative to foster an environment in which rights to both private and public forms of social protection can be regulated and protected. However, governments cannot do everything and stakeholders – employers, trade-unions, non-governmental organizations, community-based organizations and individuals – each have important roles to play in ensuring the provision of social protection to members of society. top ^

Terms of Reference for the Commission on Pension and Pension Administration Reform

Proposed role and operations of the Commission on Pension and Pension Administration Reform


It is proposed that the Commission on Pension and Pension Administration Reform will be composed and operate in a manner similar to that of the Commission on Tax Reform and Administration.

Role of the Commission
  The Commission should:
  1. Direct the Research Staff in its research activities on the issue of Pension Reform.
  2. Review the economic and financial context of pension reform.
  3. Review the existing government pension systems.
  4. Review the degree to which there is integration or coordination with national social security systems.
  5. Examine the Anguilla experience.
  6. Review pension arrangements in the private sector and in statutory bodies.
  7. Identify best practices.
  8. Identify governance, administrative and legal gaps.
  9. Establish benchmarks and indicators.
  10. Make recommendations for improving and harmonizing the administration of private and statutory bodies’ pension plans. top ^
     

Composition and Meetings

 

Between five and seven eminent persons from the ECCU should be named to the Commission. A Chairperson should be named. The Commission should meet at least monthly but as frequently as needed. Secretarial support should be provided by the ECCB.

The Administrative Assistant, designated Secretary to the Commission, should consult with the Chairperson of the Commission on:

  1. Notification of Meetings
  2. Preparation of Agenda
  3. Preparation of Meetings
  4. Preparation and Circulation of Minutes
  5. Communicating with Research Staff
  and undertake other duties as assigned by the Chairperson. top ^
     
Operations of the Commission
  The Commission should:
  1. Determine objectives and structure of the Final Report.
  2. Based on the structure of the Report, identify and assign areas of research either among the Commissioners, the Research Staff, or through consultancy.
  3. Discuss the issues identified at regular meetings.
  4. Hold discussions with representatives of the public and private sector throughout the Currency Union to obtain input on the critical issues.
  5. Document deliberations throughout the Currency Union to provide a basis for the Final Report.
  6. Circulate the Draft Report to member governments and discuss the Draft Report in consultations with representatives of the private and public sectors.
  7.
Present the Draft Report, together with input from the above consultations, to the Monetary Council.
  8. Prepare a Final Report and present it to the Monetary Council.
  9. Establish a Technical Group to implement the recommendations contained in the Final Report.
  The ECCB should pursue financing for the operations of the Commission. top ^
     
Institutional Support for the Commission
  The ECCB should arrange institutional support for the Commission.
     
Role of Research Staff and Administrative Assistant
  The Committee of Social Security Research Officers, and the Research Department of the ECCB, would provide technical support to the Commission in undertaking research on issues identified by the Commission. This involves:
  1. Gathering and analyzing data;
  2. Conducting interviews; and
  3. Undertaking surveys.
 

The Commission would engage actuarial support as necessary.

The Administrative Assistant, in conjunction with the designated Research Head, would be responsible for coordinating the activities of the Research Team. The Administrative Assistant would also be the Chief Accounting Officer.

Two Advisory Bodies would assist the Commission, namely:

  1. The Joint Meeting of ECCB, Directors of Social Security Systems
  2. The Joint Meeting of ECCB, Permanent/Financial Secretaries.
  Quarterly reports from the Commission shall be discussed at the joint meetings. The ECCB should communicate the recommendations of the meetings to the Commission. top ^
     
Commission on Pension and Pension Administration Reform
  CARTAC/ECCB Regional Conference on National and Public Sector Pension Plans: Issues and Reform (June 2009)
  Update on the Work of the Commission on Pension and Pension Administration Reform (June 2009)
  First Interim Report - Commission on Pension and Pension Administration Reform in the Eastern Caribbean Currency Union (ECCU) (October 2008)


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