Published On: Thu, Mar 9th, 2017

“Position APS is worrisome”

Richard Gibson - HHGREAT BAY – The financial position of the General Pension Fund APS has become more worrisome in 2015, the General Audit Chamber writes in its audit of the fund’s 2015 financial statements. Finance Minister Richard Gibson (see photo left) received the report from the Audit Chamber on Monday.

The drop in the coverage ratio from 97.6 percent in 2014 to 93.2 percent in 2015, is a key indicator. The coverage ratio is an important measure used by a pension fund to determine if its assets will be able to cover future pension obligations. The minimum standard required by the Central Bank of Curaçao and Sint Maarten is 100 percent.

APS did not meet the internal standard of its investment policy, which requires a long-term return of 5.5 percent on its entire portfolio. In 2015, the APS recorded a 0.39 percent return on its investment portfolio. The average return since 2011 is 4.29 percent.

Factors that contribute to the tenuous financial position of the APS include APS’s invoicing of lower than legally required premiums (22 percent instead of 25 percent), and the long outstanding claims against both the government of Sint Maarten and the General Pension Fund of Curaçao. The payment of 19 million guilders from the sale of the government building, and the payment of 60 million guilders based on the division of assets and liabilities between Sint Maarten and the Netherlands Antilles, was not fulfilled. At the time of publication, the Audit Chamber had not received confirmation of the resolution of these claims.

The Audit Chamber believes that the agreement reached between government, labor representatives of civil servants and the APS to reform the pension system may lead to sustainability of the fund. “However, compared to the current pension system, the new system represents austerity,” the Audit Chamber writes.

The proposed changes of the pension system include an increase of the retirement age to 65 years, introduction of a pension based on the average-salary over a career instead of a final-salary arrangement, and the lowering of the minimum participation age to 18 years. In its report, the Audit Chamber expresses the hope that the APS will inform participants in a timely fashion about the reasons and consequences of the proposed changes.

There are several encouraging improvements at the fund. APS presented the 2015 Financial Statements and the 2015 Budget within the legally required timeframe. APS is finalizing the amendment of its investment policy to align it with its new strategy. The APS reported that it has been invoicing based on the legally required premium of 25 percent per January 1, 2016.

The APS also increased the certainty regarding the accuracy and comprehensiveness of the basic data in the participants’ administration. The Audit Chamber cautions that despite the progress in improving the basic data, it cannot disregard the challenges related to the payroll administration process of government. Government is the largest participating organization of the APS. Because of the inadequate management within the payroll administration process, there is a risk that the data provided by government to the APS is inaccurate and incomplete. Government’s shortcomings should not be allowed to impact the reliability of the participation administration of the APS. Therefore, the Audit Chamber recommends that government acts to ensure that their payroll administration is put in order.

Additional recommendations provided to APS include, drafting and implementing a well-defined and realistic plan to achieve a coverage ratio of at least 100 percent, and securing the outstanding claims.

The report is published in both English and Dutch and is available on the website of the General Audit Chamber (www.arsxm.org).

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