Pensions board pledges transparency

Following a Caymanian Compass report on bonuses, other payments and “ad hoc” consultant fees given to staff at the Public Service Pensions Board, officials released a statement indicating the organisation has introduced measures to increase transparency and accountability.

The Public Service Pensions Board manages the retirement funds for Cayman Islands civil servants, as well as local judges and elected members of the Legislative Assembly.

“[The Public Service Pension system] continues to place a high priority on ensuring that contributions paid into the fund are approved for disbursements based on objective and comprehensive policies,” the statement, released Friday, read. “A series of measures intended to improve the management of the organisation as a whole, as well as to provide increased transparency and accountability for the disbursement of funds have been implemented.”

The statement was released in response to a 21 October article in the Compass which revealed policies that awarded pay increases, bonuses totalling up to 20 per cent of salary some cases, and self-described “ad hoc” consultant payments by Cayman’s Public Service Pensions Board were not clear and – in some cases – “inherently compromised”.

The information from that report was compiled by government’s Internal Audit Unit and covered a period generally between mid-2008 and the end of 2009. The report was released to the government in February 2011, but was only made public following its release by the Compass.

Board officials said in the statement they requested the agement policies and internal controls within the pension system. Most of the problems had “been resolved” before the audit’s release in February 2011, officials said.

However, despite claims of improved transparency, a number of reports regarding the financial health of the public pensions fund – which have been requested by the Compass – have not been revealed.

Also, the Public Service Pensions Board’s ownership agreement with the Cayman Islands government for 2011/12 contains virtually no information regarding the financial performance of the fund.

The ownership agreement document for the current budget year [2011/12] lists the net assets of the Public Service Pensions system as ‘information not available’. Also, the total liabilities of the Public Service Pensions system, as per the latest actuarial valuation on 1 January, 2005 are listed as ‘information not available’.

The net worth of the pensions system, which is subject to the next actuarial evaluation, was again listed as ‘information not available.’

An e-mail seeking clarification about the ownership agreement statements was sent to Financial Secretary Ken Jefferson, who is listed as the ex-officio chairman of the pensions board, and copied to Premier McKeeva Bush’s office on 21 June. At press time, the Caymanian Compass had received no response.

Statements contained in an auditor general’s office review have indicated two actuarial reviews of the public pension system have been done since the report dated 1 January, 2005. An actuarial review is done to determine what the estimated assets of the retirement fund will be compared to estimated liabilities over a period of years, essentially to determine whether – in the actuaries’ view – the fund will have enough money to cover what it is required to pay in future years.

An actuarial report dated 1 January, 2008, was completed in March 2009, according to records from the Public Service Pensions Board. It has never been released.

In addition, auditor general’s reports have revealed the pensions board tentatively agreed on an “accelerated” evaluation of the pension system to be completed in January 2010 “to determine the impact of the financial crisis on the adequacy of the funding” for the various pension plans. According to the auditor general’s office, that report was also completed and has also not been released. The Compass has requested copies of both reports through the Freedom of Information Law.

Statements made to investors have revealed some figures with regard to the more recent unfunded liability of the public pensions system, but supporting documentation has not been made available.

The estimated liability amount grew from CI$116.5 million in mid-2006 to an estimated CI$266.5 million by mid-2009, according to government figures.

The $116.5 million figure was revealed in an annual report from the Public Service Pensions Board made public in the Legislative Assembly in 2010. That report, for budget year 2005-06, took four years to release.

The 2006 figure for unfunded liability in the Public Service Pension plans was later supplanted by an actuarial estimate of CI$165.7 million.

A subsequent assessment in 2008 – for which the actuarial report has never been made public – put the unfunded liability figure at US$248.4 million, or roughly CI$204 million. Another figure estimated for mid-2009 put that unfunded amount at US$325 million, or CI$266.5 million).

An unfunded liability is the best estimate of what will be owed over a rolling 20-year period to maintain pension benefits for retired civil servants who receive monthly payments. It applies only to civil servants who are in the defined benefit retirement plan.