Published On: Wed, Jan 16th, 2013

Offer mandatory basic pension in competition

WILLEMSTAD – The mandatory basic pension should be offered in competition by pension funds that are under supervision of the Central Bank of Curaçao and St. Maarten (CBCS) and have a valid license. This is one of the recommendations in the final advice on the mandatory pension, which the Committee General Employees’ Pension presented to the Minster of Social Development, Labor and Welfare (SOAW), Sherwin Josepha (PS), last Friday. According to the final advice, this stimulates company pension funds or life insurance companies to constantly put participants’ interest first and foremost. “Furthermore, as this is in keeping with the current situation, the introduction will have a minimum disruptive effect on the market”, according to the report that is yet to be presented to the Council of Ministers.

In the scenario recommended by the committee the mandatory pension scheme will be introduced on January 1st 2014. The committee was set up following a ministerial order in January 2012 to restructure the current pension system. The committee’s assignment was to develop a pension scheme that enables employees to manage their own affairs after their retirement. According to figures from 2012, approx. 50 percent of the employed Curaçao population is currently not building up a pension and a significant percentage of the retired population receives only AOV.

Due to ageing of the population, among other things, the AOV-fund will show a cumulative deficit of 7.6 billion guilders in the next twenty years.

Increase of premium

According to the advice, the mandatory pension is meant for ‘everyone who works for wages in the country and is to pay a premium’, including people in employment, small businessmen/women and self-employed persons without personnel. Other parts of the scenario drawn up by the committee are among other things, an equally dividing of the premium between employee and employer. In 2014, the premium would be 2 percent, whereby the employee and employer each contribute 1 percent, increasing to 6 percent in 2018 with twice an increase of 0.5 percent per year. The premium basis is the ‘pension providing income’ that consists of twelve times the fixed gross salary per month, eventually increased with other structural payment components. The committee’s advice also departs from an economic growth of 1 percent per year in the next twenty years with consequently an assumed salary increase of 2.2 percent per year. The latter takes into account the influence of increased premium burdens on the purchasing power.

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