Reforms (Pension Reform)
2012 was a historic year for FNPF as it took decisive actions to address the long-unresolved issue of pension sustainability. Underpinning this change was the promulgation of new FNPF legislation that placed the pension scheme onto a sustainable platform.
FNPF Decree 2011
Promulgated on 25 November 2011, the Decree provided the framework that enabled the Fund to commence the implementation of the restructuring of the pension scheme, which was the priority in our reform agenda to protect the future of our members.
As at 30 June 2011, total liabilities for the 11,000 pensioners amounted to $565 million, compared with $312 million set aside for pensions. The shortfall in pension income against pension payment meant that current membersâ€™ savings were used to pay for this difference. The new scheme, introduced on 1 March, 2012, has addressed this with the adoption of actuarially fair age-based pension conversion rates.
To effect the new scheme, the old pension business was terminated. Existing pensioners were provided the opportunity to re-exercise their pension options based on their initial pensionable amounts. These options included life pension and term annuity products under the new scheme, and lump sum withdrawals. To mitigate the impact of the adjusted life pension rates, the Fund offered top-ups to those who opted for full life pension.
Of the 10,113 validated pensioners, 6,875 opted to reinvest $168 million into the Fundâ€™s new scheme, whilst 3,223 pensioners exited through lump sum withdrawals totalling $126.7 million.
The Fund had set aside $57 million for top-ups. For those who qualified for this, 1,450 or 24 per cent received a higher monthly pension capped at $100 per month, 2,820 or 48 per cent continued to receive the same monthly pension as in the old scheme and only 15 pensioners who opted to remain with the FNPF suffered a reduction in pension by more than 50 per cent.
In a nutshell, the changes to the pension scheme have been absolutely necessary to ensure that the Fund remains sustainable in the long-term; and our current and future pensioners and members have the pension they deserve in retirement.
Read more â€“ (Pension Reform â€“ FAQ)