April 14, 2011 Leave a comment
The announcement that the Fiji National Provident Fund Act will be reviewed can mean only one thing. The long awaited announcement that the formula for calculating pensions will be changed.
The only question is how severe will the change be. At the moment the pension is calculated as 15 percent annually of the total amount saved for a single person pension. For married couples, the percentage is lower because the pension continues until both husband and wife have passed away.
‘The Government will took at two options. They can decrease the percentage of the lump sum they pay as pension, or they can put a limit on how long people can continue to receive the pension.
They’ve engaged an international company who specialise in working out all the complicated mathematics needed to decide how much a pension fund can afford to pay.
The hardest thing for the company selected, Promontory Financial Group Australasia, to decide is how the FNPF’s investments will perform over the next 10 years. If they assume that the performance over the past four years will continue into the future, they will have to recommend huge cuts in the pension rate.
This will test the reputation of the company, which is probably the cover the Bainimarama Government is hoping to hide behind when they announce the cut in the pension formula.
Let’s hope that for once the Bainimarama Government is willing to be really open and make sure we understand the assumptions behind whatever recommendations the Promontory Financial Group Australasia makes.
The lives of so many people depend on their recommendations.