Fiji National Provident Fund : FNPF assures members all submissions will be considered

08 June 2011

The Fiji National Provident Fund has assured its members that all submissions made at the public consultations will be considered by the Board before a final decision on the Pension Reform is made.

FNPF Chief Executive, Aisake Taito said the Fund has noted that various concerns and issues have been raised by members of the Fund.

He said that while Executives of the Fund have addressed some of these issues during the consultations, there were members who are still unclear of the objectives of the reform.

“In order for members to have a better understanding of these issues, it is important they attend the public consultations.

“These meetings not only provide an opportunity to inform members of the current status of the Fund in terms of its financial position, operation and proposed changes to the Pension and FNPF Act; it also gives members the opportunity to submit their views and recommendations on the proposed changes under consideration,” he said.

Mr Taito said the Fund is taking on board all views submitted during the consultations which will form part of the recommendations made to the Board for the way forward in terms of the Pension Reform.

Some of the other major recurring issues by members include:

Investment issues

Members are concerned about the recent investment write-down and need assurances from the Board and Management that proper procedures are in place to ensure that past mistakes are not repeated. There is also an expectation that all those responsible be taken to task.

The Fund has reviewed its procedure to ensure that due diligence and corporate governance is adhered to.

Questions have been raised regarding the reasons for the concentration of the investment portfolio in Government borrowings and statutory bodies.

The concentration of the investment portfolio in Government borrowings and statutory bodies are largely due to the limited investment opportunities available locally. The Fund is therefore working closely with the Reserve Bank to allow more investments offshore.

Members continue to attribute the current reviews to the write down.

Members should note that the need to review the current pension scheme is not a direct result of the recent investment write-down. The need to review the pension scheme was identified way back in 1992, before the Natadola and Momi projects were even considered.

Board Structure

It is clear from the consultation that members need a stronger voice in the appointment of their representatives to the Board. Concerns were also raised on the level of skill and independence of board directors.

The proposed changes will address these concerns by increasing the number of independent members and will specify certain level of qualification and skill mix for board membership. The Act will also address the duty and obligations of the Board in respect to acting in the best interest of the members.

Financial Status

Some members are still of the view that the Fund is under financial difficulties and are confused between the need to address the long-term sustainable issue created by the generous pension scheme and meeting the immediate financial requirement.

The Board assures the public and the members that the Fund is safe and members’ funds are secure. However, continuing to meet the future pension obligation is not sustainable in the long term if the pension rates are not adjusted. The proposed changes to the pension conversion rates had been actuarially tested and will solve this issue. The Fund is also proposing to separate the pension business from the accumulation business of the current members to avoid cross-subsidisation and is in line with international best practices.

Corporate Governance

Members have stated they would like to be better informed of the businesses of the Fund especially on changes taking place.

The proposed provisions under the FNPF Act Review allows for more disclosures and transparency in the operations of the Fund.

Adjustment period for pensioners & Implementation period

Pensioners attending the consultations have raised their concerns on the proposed changes.

The Fund will consider the poverty threshold to increase the minimum mandatory pensionable amount. Such major changes cannot take place overnight as there are many other considerations to be made apart from the members’ and pensioners’ perspective, including the systems in place for implementation, the governing Act and considerations, among others.

The Fund again assures that these concerns are being considered before actual changes are implemented.

In addition, Mr Taito has urged all members to attend the meetings as these changes will affect them also.

“This week we will be in Nadi, Lautoka, Naitaisiri, Sigatoka and Levuka so we advise our members, and the employers to attend the scheduled meetings,” he added.

The consultation is expected to end within the next week.

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