Wehby proposes pension portability
TO HELP make the public sector more attractive to young people, businessman and government Senator Don Wehby says the Government should consider making pensions portable as well as shorten vesting periods.
The recommendations were among several Wehby proposed on Friday as he made his contribution to the Senate debate on two pieces of pension reform legislation.
The current system, he said, does not provide for portability of pensions, which “is a disincentive for persons who wish to move into the private sector”.
According to the group chief executive officer of GraceKennedy Limited, portability of pensions is also “very important” in the context of rationalising the public sector.
“I am suggesting that we seriously consider this in the future. So, in other words, someone leaving the public sector would be able to transfer their accumulated benefits to a private-sector pension scheme.”
CUT VESTING PERIOD
Wehby has also recommended cutting the period of vesting – when workers become entitled to getting pension benefits from their employers equal to the amount they contributed.
“The vesting period stands at 10 years. I believe that at some point after the segregated fund is established, we should look into reducing the period to five years or introduce a graded vesting system.
Wehby, meanwhile, said pensions should be linked to price increases.
“Within our current economic realities, without indexation pension payments can quickly become inadequate to cover retirees’ expenses during retirement. My understanding is that at this time, pension increases are granted on an ad hoc basis through appropriations from the Budget.
He added that indexation of pensions should be standardised to avoid ad hoc increases and allow for transparency. Doing so, he said, must involve consideration for affordability and based on actuarial evaluations.
The Constitution (Amendment) (Established Fund) (Payment of Pensions) Act, 2017 will establish a contributory pension scheme in the public sector, as well as a segregated fund from which payments will be made. The House of Representatives has already approved the legislation.