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By Hilbert Haar
The initiative of the ministry of Public Health, Social Development and Labor to introduce a supplementary pension plan sounds like a charming idea. The lofty objective is to provide pensioners with more income and by doing so, protecting their living standards. Who would not want to do that?
Unfortunately, there are obstacles on the road to the introduction of such a plan. The first question that comes to mind is: who is going to pay for it? And the second one: who is going to benefit?
Supplementary pension systems do exist elsewhere in the world. In some countries, only employers contribute to this new pension fund, In other countries, employees contribute as well.
In our current system, pension premiums take a small bite out of your gross salary and nobody is likely to lose a night’s sleep over it. Retirees get their retirement money from people who contributed to the system before them. New retirees have to rely on a new generation of workers who are contributing to the same system.
Due to the current setup, pension funds have lots of money at their disposal. But if you set up a new pension fund, the bank account for that system will remain mostly empty for quite some time. At least, there will not be a lot of money to distribute among the participants.
A supplementary pension system for a small community like St, Maarten needs a lot of time to build up enough capital to satisfy its participants. There will hardly be a penny left for doing what pension funds do: invest the premiums they receive to safeguard future payments.
I am looking forward with some concern to the advice the Social Economic Council is going to give about this issue. Maybe I am wrong for all the wrong reasons, I don’t know. After all, I am not an expert in the field of pensions.
There is however one thing I do know. Somebody will have to put the money on the table to make a supplementary pension system viable – the employers or the employees or the employers and the employees.
Let me be clear: I am not writing this to shoot down a commendable initiative. All I do is wonder: is this feasible or is it just a political pipedream?
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