Major changes expected for FNPF members

Major changes are expected for members of the Fiji National Provident Fund by the 1st of July this year, which include the pension rate reduction upon retirement.

FNPF has today revealed in its symposium that it is looking at a new pension rate system when people retire.

It indicates that the option that is highly likely to be adopted will be:

A single pensioner will get about 8.8 percent pension rates per year if he retires at 55 and opts for FNPF pension.

But there will be other options for people from this year where a person can opt to take their pension when they turn 60.

If they decide on that, then their pension rate would be about 9.8 percent while a person who takes his pension at 65, their pension rate could be about 11.6 percent.

For joint pensioners, the pension rate would be around 7.4 percent at 55, 8.1 percent at 60 years and about 8.8 percent at 65 years.

This means that the option will be with the FNPF member on when they want to take their retirement money, and the options begin from when the member reaches the age of 55.

At the moment members who take up the pension option get 15 percent of their total balance paid out every year until they die.

Consultants, Promontory and Mercer say this rate is unsustainable based on the mortality rates and the investment returns as the member's total balance is exhausted by about the 7th year and there onwards FNPF is forking out funds to continue paying the 15 percent rate due to the fact that many people are outliving their pension.
 
The other FNPF option upon retirement is the member taking up his lump sum retirement saving.

There is a proposal to have a compulsory pension system because many members who have gone for the lump sum option have ended up spending their money quickly and then trying to get social welfare benefits because they have run out of money.

FNPF also confirmed that employer and employee FNPF contributions with the option for increases is under active consideration.

Employees currently contribute 8 percent of their salary to their FNPF retirement saving while the employer contributes an additional 8 percent.

There are also options being looked at whether people currently on FNPF pension will also face reductions.

The final decision is yet to be made on this issue.

Some participants called on the pension rate to remain at 15 percent however the consultants made it clear that this would make FNPF unsustainable and the tough decision needs to be made to reduce the rate.

Attorney General, Aiyaz Sayed-Khaiyum said as consultations continue on the reforms, they will also get ready to implement a number of changes by July 1st.