Saba Island Council passes motion seeking to solve PCN underfunding

Considering that the Pension Fund Caribbean Netherlands PCN is underfunded, which led to a reduction in the gross pension from April 1, 2017, to 3.5 per cent, that may be followed by a second reduction of approximately 12 per cent on April 1, 2018, the Island Council of Saba unanimously passed a motion in its meeting of Tuesday, April 18, to address finding a solution to the problem.

Firstly, in the general interest and that of the PCN pensioners and future pensioners, in particular, it will request that the Executive Council together with the PCN and representatives of trade unions approach the Dutch Central Bank DNB and the Dutch Government to request more time for the PCN to present a solution in consultation with other stakeholders to compensate for the funding shortfall.

Secondly, it will ask the Executive Council to ask the Dutch Government to settle the PCN’s debt based on the amended rules such that there is no longer a shortfall dating back to 10- 10-10.

These steps will require the preparation of an indepth review, during the course of which an actuary and other experts can determine whether the basis for the calculation of the pension per October 10, 2010, has been proven to be incorrect; and provide assistance to develop a recovery plan with, if necessary, additional financial contribution from the Dutch Government; and in implementing the new financial assessment framework in the Netherlands (the socalled nFTK), which leads to fewer reductions and the ability to spread any reduction over 10 years. The nFTK as it stands does not apply to Bonaire, St. Eustatius and Saba (BES islands) or the PCN, which the Island Council finds unfair.

The Island Council believes the insufficient funding of PCN is rooted in DNB’s modifying the calculation of the pension fund; that the Dutch Government understood at the time of the political transition of 10-10-10 that former pension fund of the Netherlands Antilles APNA was insufficiently capitalised and therefore unsustainable. On the basis of that consideration it opted for a private pension fund PCN.

With its establishment, PCN was given a certain amount of capital which was derived from part of the funds of the APNA corresponding to the assets of members and pensioners of the BES islands and an additional payment by the Dutch Government, such additional payment determined based on the calculation by the Dutch State pension on October 10, 2010.

However, the DNB as supervisor stated in 2013 that the assumptions underlying the pension liabilities were not calculated carefully enough; that, according to the DNB, the PCN should have taken into account lower interest rates and higher life expectancy than that which the Dutch Government did when transferring the pension obligations to the PCN.

The PCN believes the Dutch Government has paid too little and still owes additional money to the PCN available reserves (approximately US $70 to $100 million). These funds would increase PCN’s coverage – measured at 77 per cent at the end of December 2016 – and eliminate the need for a reduction.

The PCN has been in discussions with the Dutch Government on this issue for some time, but this has not yet led to results and despite its potential claim against the Dutch Government of $70 million in anticipation of legal proceedings, it has decided not to proceed as long there is a possible solution.

At this point the Island Council believes the Executive Council should do everything possible to eliminate the reduction in the gross pension that occurred from April 1, 2017, and may also be implemented on April 1, 2018, considering that the PCN has established the legally required recovery plan.

Further motivating the Island Council’s motion is the fact that Minister Ronald Plasterk, in his letter to the Second Chamber of the Dutch Parliament of May 12, 2016, regarding the government’s response to the Spies evaluation, states that government together with local partners in the coming period will boost the socio-economic development of Saba with specific measures to improve the standard of living for vulnerable groups.

It is felt that a reduction of 15.5 per cent (in 2017 and 2018) on the gross pension, and the pension rights of members whose pension has not yet begun, in combination with any other measures to maintain and make the pension fund solvent, will lead to a substantial drop in purchasing power, which in turn will be to the detriment of the socio-economic situation of Saba in general and of retired citizens in particular, and this is counterproductive to the additional measures to improve the standard of living proposed by the Dutch Government for vulnerable groups, which is, consequently, undesirable.

The Daily Herald.

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