Reforming the Government Pension Scheme
All public officers who work up to the age of fifty-five in the government system are entitled, by law, to a pension, or a monthly percentage of roughly two-thirds of their last salary each month until they die. This system was established decades ago and is still being honoured by the government. According to the government certain prevailing factors, such as the growing number of retirees each year, the extended lifespan that people are now living, and the fact that the pension is unfunded, are making the continuation of the scheme in its current form unsustainable. They’ve since held discussions with the various unions to make amendments to the scheme, which includes a contribution from public officers towards their pension, as well as reducing the percentage that they collect each month upon retirement, and also extending the retirement age. The changes should have come into effect on July first, but there has still been no amendment to the Pensions Act to allow for the changes to take effect. And while the government is determined to reform the pension scheme, there is concern among public officers as to the figures they will be required to contribute and the amount they will collect at the end of their service. News Five’s Marion Ali takes a deeper look at the government pension scheme in this edition of News Five’s Five Point Breakdown.
Marion Ali, Reporting
The retirement age of fifty-five was established during the days of colonialism, when the civil service was staffed by people from Great Britain. A decision was taken back then that fifty-five would be an appropriate age for them to return to their country to spend the rest of their lives in retirement. And when Belize became independent, it adopted that age and applied it to the existing system of the public service. But now, the government says there is an urgent need to reform the public service pension. Before we go any further, what is the government pension?
What is the Public Service Pension?
Phillip Castillo
Dr. Phillip Castillo, Assistant Professor, U.B.
“You have served a certain number of years and then you become entitled to a pension until death, basically. Your pension is like a second pay, so when government hires you, you work until you retire, and then you get a pay, and then from retirement until death, you get a pension.”
Dr. Phillip Castillo is an assistant professor at the University of Belize who gave a Power Point presentation on the current government pension scheme at the second annual Gian Ghandi Memorial Lecture in April 2022. Castillo’s position is that there is urgent need for pension reform because the scheme is unsustainable and Belize remains the only former British colony that has not yet had a public service pension reform.
Dr. Phillip Castillo
“The current beneficiaries contribute zero to the pension scheme. So if government collects more revenue, then what government does is have the ability to extend the current scheme for a longer time. But that does not negate the fact that at some point, you need to contribute to your pension to make it sustainable. From 2008 to 2023, you’re looking at how many years, about 15 years, basically, the pensions bill has jumped from 38 million – nearly tripled – at least increased by a factor of at least two and a half, from 38 million to 100 million.”
The Proposed Amendments
The government’s proposal was that on July first, the pension reform for public officers would have taken effect, but there has still not been any amendment to the legislation governing the scheme. The government had started having dialogue on the topic in early February with the Public Service Union regarding the reform on the same grounds that Dr Castillo presented. The proposed reform will take a phased approach: a new contributory pension scheme applicable only to new entrants into the public service and a comprehensive review of the existing public service pension scheme to determine how to make it more sustainable. Minister of State in Finance, Chris Coye indicated that government will meet again with PSU representatives later this week on the topic.
Chris Coye
Chris Coye, Minister of State, Finance
“Part of the discussion that we’re looking to have is whether, to what extent there can be some phased in approach for a portion, not all, a portion of existing employees of the public service. Let’s say those that have, just using as examples, those that have up to ten years of service, the phasing in approach would be that the contribution rate would kick in on a yearly basis. So, in terms of the contribution rate, let’s say one percent, half from the employer, half from the employee for each year. So it takes 10 years to fully phase in the contribution rate mechanism. And then in the case of the retirement age, that it would be phased in on a yearly basis too. So it increases from 55 to 56, 56 to 57, and, and so forth. And then the replacement rate would be adjusted to 50%. So, currently – the replacement rate is basically like the average pension you get as a percentage of the average salary that you retired at. If it’s at 66, then it goes to 65, and in the first year, 64, and, and, and thereafter. So that would take 16 years to, to fully implement.”
Coye compared Belize’s public service pension rates to the rest of the region.
Chris Coye
“You look at the total replacement rate of both the public officer’s pension plan together with the social security pension plan, and that is almost 100%. But the portion that is just the public officer’s pension plan is around 66, 67%. So, the adjustment would be to shift that from 66 to 50%. So overall, you still would be let’s say around 80% replacement rate. If you compare that to the region, the total replacement rate on average is around 61%. So as it is currently close to a hundred percent, we are 30 to 40% higher than what is – prevails in the region on average in the entire Latin America and the Caribbean.”
Existing Concerns from Public Officers
There are concerns among public officers who will retire in a few years from the public service. Annisa Perdomo is a senior tax officer at the Tax Department who will retire in the next three years.
Annisa Perdomo
Annisa Perdomo, Senior Tax Officer, Belize Tax Service
“I’m not there yet as meaning 55. I will be in a couple years, so there is a question of what would happen to me when I retire between 50 and 55? Who is going to be monitoring the scheme? Will public officers at that age be joining into the contributory pension? Why I say that is because you’re reaching that time, you know, you should be preparing yourself to retire, you shouldn’t be preparing to take on another deduction as such. Well, I take it as, you know, a kind of hardship. Ah wa use hardship.”
The P.S.U: No Public Service Pension Reform Before Tax Reform
President of the Public Service Union, Dean Flowers says the Public Service Union is open to further discussion on the topic. The P.S.U., however, does not agree that a public service pension reform is an urgent necessity, at least not before tax reform.
Dean Flowers
Dean Flowers, President, Public Service Union
“The government today is unable to provide to the joint unions the quantity, the sums, the millions, if not billions of dollars that they are losing in tax evasion and tax avoidance where customs and excise tax duty taxes are concerned. They’re unable to quantify the leakages in the business sector where general sales tax is concerned. They’re unable to quantify how many corporate income tax we’re losing. How much money in taxpayers dollars have been given away in tax holidays and fiscal incentives to multinationals and private sector investors?”
What New Public Officers Should Bear in Mind
Aside from being a senior tax officer, Annisa Perdomo is also the Public Service Union’s First Vice President. She believes that while university graduates should pursue employment within the public service, they need to pay keen attention to the terms of their employment.
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Annisa Perdomo
“If you’re deciding to join the public service, make sure you know, what’s your contract of employee entails? Obviously now it would entail some kind of pension contributory pension for those in the system now, what ih wa entails to dehn, you know. At what point? It used to be after 15 years you start to contribute – you would get a full pension. Now it will change from 15 to what?”
The meeting later this week between the government and the unions should answer these concerns definitively. Marion Ali for News Five.
