Cayman Islands Auditor General Alastair Swarbrick said earlier this month that his office would be taking an in-depth look at the territory’s public sector retirement schemes.
The auditor’s office has consistently raised an issue over the Public Service Pensions funds during the last several years in annual reports reviewing the financial health of the retirement savings schemes.
“They’re all operating different pension schemes, so the assets are related to the individual schemes,” Mr. Swarbrick said. “From my perspective, they should separate it out.”
The Public Service Pensions Board is responsible for managing three separate retirement funds – from Mr. Swarbrick’s view that could potentially be considered four separate funds. The Parliamentary Pensions fund, the Judicial retirement scheme and the Public Service Pensions fund; both for civil servants on defined contribution retirement plans and defined benefit pension schemes.
Mr. Swarbrick said the judicial, parliamentary and civil service retirement funds all operate under different laws, but their investment funds are pooled into one set of financial statements.
“The issue is the level of funding for the overall pensions,” Mr. Swarbrick said. “Civil service pensions, judicial pensions … those assets should be assigned to those schemes. You could also talk about it in terms of defined benefit and defined contribution schemes and whether they should be separated out as well – in my view they should be.”
In a number of annual reports filed by the Public Service Pensions Board – the financial statements for which are audited by Mr. Swarbrick’s office – concerns have been raised over this issue.
“The Public Service Pensions Board pooled the funds of each of the plans into one set of financial statements, and did not identify or disclose the investments and administrative expenses for each fund,” according to the auditor general’s statement included in the pensions board’s annual report for 2009/10. “I believe the intent of [the three separate pensions laws] was to have a separate reporting of financial information for each fund.”
In each audit, Public Service Pensions managers have stated: “The passage of the Parliamentary Pensions Law in 2004 created the unintended effect of requiring the board to prepare and maintain a distinct and separate set of financials for the Parliamentary Pensions fund.”
In a 2008 actuarial evaluation, there were concerns raised over investments into the parliamentary retirement plan.
The evaluation prepared by board consultant Subramanian Sundaresan indicated the “funded ratio” for the parliamentarians’ retirement plan also improved – from 14 to 24 per cent – between 2005 and 2008; meaning legislators’ retirement plans were only 24 per cent funded as of 1 January, 2008.
The asset value of the plan by 1 January, 2008, was actually $1.9 million, the report stated, despite claims that some $4.7 million in assets were available to the fund.
“An additional $2.980,538.66 was paid into the fund on November 25, 2008, in respect of contributions for periods prior to January 2008,” Mr. Sundaresan noted. “The resulting discounted value of this additional contribution was $2.8 million. The total value of assets taken into account for this valuation was thus $4.7 million.”
Mr. Sundaresan continued that the parliamentary plan’s financing was “very sensitive” to contributions being made on time as well as “the incidence of retirements and the consequent lump sum commutation being paid”.
“This needs to be constantly monitored,” he said.
The auditor general’s office said it didn’t have enough information to comment on the matter. However, Mr. Swarbrick noted his concern that the 2008 report had taken three years to release and that it had still not been tabled before the Legislative Assembly as required by law.
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