Published On: Fri, Aug 28th, 2020

Pension fund toys with plan to reduce pensions

PHILIPSBURG – The General Pension Fund APS is not financially sound and never has been, it appears from a compliance audit published by the General Audit Chamber. While the APS coverage ratio significantly improved in 2019 from 97.6 to 103.8 percent, it still falls short of the minimum ratio of 105 percent that is required to cover its general and investment risks.

Related: Insuffient progress on APS’s domestic investment projects

The result of local investments is dragging the pension fund’s performance down. Since 2015 these investments have shown a negative result of around 1 percent every year. In 2018 the fund suffered significant losses from its international investment portfolio of close to 9 percent but in 2019 its fortunes changed for the better with a positive result of more than 16 percent.

The General Audit Chamber remains concerned about the fund’s financial health. It notes that the recovery plan the fund wrote in 2019 contains far-reaching measures. One of them is a possible reduction in pension payments.

“Measures to achieve a 105 percent funding ratio should not be borne by the government, participants or the general public,” the Audit Chamber writes in its report.

Related news: Laws need to be put in place to protect pensioners

The audit lists a number of local investments that have all gone to seed. In 2016, APS bought Mary’s Fancy for 4 million guilders with the intention to build a boutique hotel combined with an art gallery, outdoor museum and botanical garden. In its 2017 financial statement APS announced that the project would be completed in 2020, but the 2019 statement mentions the fourth quarter of this year as the moment when construction will begin. Completion will take 15 months, so as things stand now everything should be up and running around January of February 2022.

Another stalled project is the parking lot next to the government administration building on Soualiga Boulevard. APS acquired the land in 2016 as part of a debt settlement with the government. Construction of a multi-level parking garage with commercial real estate on the ground floor was supposed to begin in 2018 and the project should have been completed in 2020. But in its 2019 financial statement APS notes that “development is pending a decision from APS,”  that it is likely to be included in discussions with the government about a debt settlement agreement and that the project has a lower priority than Mary’s Fancy and the Oryx Hills housing project.

Oryx Hills is another thorn in the pension fund’s hide. It is a housing project with 62 units. Construction was completed in October of last year, but by July 2020, only eleven houses were sold. The cost of this project is 22.6 million guilders and the price of the houses is below $250,000.

Related news: APS to start construction of 62 residential units this summer

A fourth local investment project is the Professional Office Park, a plot of land intended for the construction of the future APS headquarters. APS bought the land in 2016 for 9.36 million guilders but until now no development has taken place. APS management told the Audit Chamber that it intended to submit a “request for proposal’ for approval to its board this month. But it remains unclear when construction will begin.

The Audit Chamber concludes that there has been little progress during the five or more years that have passed since APS invested in these local projects between 2014 and 2016,.

The auditors nevertheless conclude that the 2019 financial statement offers “a true and fair representation” of the size and composition of the fund’s assets and its financial result per the end of 2019.

In 2019, APS booked a profit of 44.3 million guilders. The auditors note that there is uncertainty about a claim of 5.37 million on the Pension Fund Curacao and about a 23.7 million claim on the government of St. Maarten.


Related links:
APS-director Nadya van Putten: “No plans to lower pensions”
Laws need to be put in place to protect pensioners
Insufficent progress on APS’s domestic investment projects
General Audit Chamber Compliance audit report on APS
APS to start construction of 62 residential units this summer
A closer look at the effects of pension reform
Our Pension dossier