The Fiji National Provident Fund Symposium, Reflections by Fr Barr

 
Fr Barr 3Fr Kevin Barr considers transparency and accountability, a just living wage, and compliance as they apply to the Fiji National Provident Fund, and sends me this email:
“I was happy enough with the media coverage of the FNPF symposium.  A lot of good work had been done by the consultants but the reality is hard for many to accept. 
If the fund is to be sustainable then (a) percentages available for pensions will have to come down from the current 15% and (b) people should not draw out large sums for other purposes during their working lives as if FNPF was simply a savings bank.  
 
They are suggesting a 30/70 whereby the 30 will be available for certain identified urgent needs and the 70 will be preserved entirely for pension.  They also suggested that, rather than people retiring at 55 they should target 60 or even 65 and then draw on pension funds. “
 
  Transparency and Accountability
One of the worries expressed by many people is that we have been told that in the interests of honesty and transparency it is good that the loss of $327m is now written off. It is all in the past and we should be looking to the future. This sounds like the National Bank of Fiji scandal where we were told that “It is all water under the bridge. We should move on.” Yet this is the peoples’ saving we are talking about. 
 
We are informed that Government guarantees FNPF funds so that the people will not lose their savings. The successive Boards which mismanaged/misappropriated FNPF funds were appointed by Government. Therefore in the interests of transparency and accountability Government should have the responsibility of seeing that the loss of workers funds is fully investigated and the funds returned to FNPF. Has an official investigation or commission yet been initiated? 
 
A Just Living Wage
In terms of building up a worker’s FNPF funds for a pension on retirement it is of vital importance that workers receive a just living wage set above the poverty line. Currently:
  • 65% of workers in full-time employment receive wages below the current poverty line of $185 a week
  • 50% of workers earn below $10,000 a year (some as low as $4,000)
  • 71% of workers earn below $15,000 a year (the tax threshold)
Because the FNPF pension scheme is a self funded scheme based on one’s income, it is obvious that deductions from such low wages for retirement in old age will be totally inadequate and will not keep retirees out of poverty. It was good to see that proposals have been made to protect the pensions of those who are “vulnerable” but there will be a large number of vulnerable members even if they have been contributing for many years of their working lives. It was noted that FNPF was not designed for complete social security in old age but it could help reduce the need for social welfare. However, currently our Social Welfare system (FAS) covers only 3% of the population and because its payments are also totally inadequate, it can hard be a safety net for those whose pension payments are very low. 
 
One of the consultants (Richard Codron) said it was important that low income earners had obtained their own home and/or land during their working lives. But how is this possible with such low wages?
Tevita Nagataleka in his presentation mentioned that 10% of members were currently receiving 35% of FNPF pension funding. These are those who had been on high incomes during their working life. It is an indication of the level of inequality in wages in Fiji. 
 
If a just living wage was required for all workers then their FNPF  contributions would increase and their pensions on retirement would  increase accordingly and help to keep them out of poverty.
Our present Government has been tackling corruption and racism but I  think that it now needs also to target social justice for the workers of the  country and ensure that they receive a just living wage. This will have  serious repercussions on the alleviation of poverty during a worker’s  lifetime and after his/her retirement. 
 
Compliance and Inspections
We know that some employers do not pay FNPF for their workers. Some deduct it from worker’s pay but do not pay it in to FNPF. In the past the Ministry of Labour and Industrial Relations undertook inspections and the enforcement of FNPF requirements. This role was then taken back by FNPF and there has been some improvement but many employers are still getting away with non-payment. It is good to see that in the proposed reforms compliance will be enforced and heavy penalties will be imposed on those who try to evade the new legislation.

Comments

Anonymous said…
Raise the minimum wage to $5 per hour, send businesses broke, half the workforce and introduce an unemployment benefit of $200 per week, and pay for it all by dismantling the military!!!

Can be done father barr.
pasifika said…
@ Anonymous

FNPF policies are not a joke. They are a matter of life and death and requires thoughtful comments.

Father Barr's call for social justice for the employed who remain poor needs strong support. Have the FNPF policies in the past been designed to benefit mainly those who formulated the policies and their buddies including ease of availability to themselves of loans from FNPF funds ? FNPF has also been negligent in not having a strong ongoing education programme on its policies resulting in formerly highly paid workers - usually indigenous - running out of cash on or soon after retirement.The cash economy and its complexities is relatively new to the indigenous population and they need ongoing education accordingly. A reduction in FNPF payments on retirement must be accompanied by ongoing rigorous education of contributors on the impact of the changes on their retirement benefits and options to be pursued to generate ongoing income for themselves. A vigorous FNPF financial literacy programme for contributors is a necessary investment by FNPF.
Just minimum wage said…
What is the point of a 'just minimum wage' when there are virtually no jobs in a declining economy? Smoke screens and rhetoric will not feed the increasing poor. In the spirit of TRUE accountability and transparency perhaps regime supporters like barr and yabaki need to be more honest and acknowledge the serious impact of this coup and the military regime on the Fijian economy over the last 4 years? And it can only get worse until democracy and freedom are restored.
Gutter press said…
Fiji has had approximately 10,000 school leavers yet just one to two thousand jobs created annually for the past 18 or 19 years. This is a systemic problem, not one that can glibly be blamed on the latest coup (although that undoubtedly has a large role to play)

Whilst we’re told that under the current payment regime FNPF will be broke within 40 years, it seems remarkably unfair that ALL pensioners should suffer a reduction in their present income from 25% of balance to 10% or less. Those who started to withdraw at 25% should be allowed to continue to do so, those who are now withdrawing at the reduced rate of 15% likewise.

Those who are yet to retire should be the only ones affected by the latest reductions since they have the option of continuing to work until a ‘normal’ retirement age of 65, or later. Most western countries set their retirement age at 65 and Fiji, since life expectancy has increased since the fund was introduced in the mid 60’s, should be no different. This has already been proposed by the consultant team working on the reviews.

As far as introducing a minimum wage goes, it’s a laudable concept but one which is doomed to fail in any country with high unemployment.

I believe that government would do better to print money to fund projects such as new hospitals which will help create jobs than to go cap in hand to overseas countries that offer ‘soft’ loans. Such loans, particularly from China, seem to do no more than provide employment for Chinese since the projects funded are designed overseas and built using imported labour and imported materials. Fiji then refunds the loan, plus 2% interest annually. I fail to see any long term economic sense in that.

Printing 2% more money instead and then introducing it into the economy would yield far greater long term value – job creation, increasing worker skills, tax generation etc. Other countries call it ‘quantitative easing’. Fiji could call it ‘economic stimulation’.

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