By: Kebba AF Touray
The National Audit Office (NAO) has reported that the Federated Pension Scheme has a deficit of about D42 Million (Forty-Two Million Dalasi).
The NAO reported this in its 2023 performance audit report on Social Security Housing and Finance Corporation (SSHFC).
The audit office reported specifically on the timeliness segment of pension increases, indicating that it has reviewed the pensions for an adjustment every three years so that pensions are effectively protected from inflation in the country.
Reporting on the Timeliness of pension increases, the NAO explained that according to their interview with SSHFC, the Corporation reviews pensions for an adjustment every three years so that pensioners are effectively protected from inflation in the country.
The NAO stated that the pension increase review is tied to the actuarial valuation dates. Accordingly, the reviews should be scheduled in January 2018, 2021, and so on.
It indicated that for the period under review, SSHFC carried out two pension reviews, one in 2019 and the other in 2022, and the pension review that was supposed to be carried out in January 2018 was done in 2019 and the pension increase was applied retrospectively.
This as stated by the office, resulted in pension drawback payments of thirteen (13) months to active pensions, while decrying that the pension review that was supposed to be made in January, 2021 was made in January, 2022.
“However, this increase has not been applied retrospectively because SSHFC management decided not to apply this increase retrospectively because the Federated Pension Scheme has a deficit of about GMD42 million,” said NAO.
The Audit Office also explained that, according to an interview with SSHFC, pension increases are not timely implemented because the rate at which pensions are increased is tied to the Actuarial Valuation Reports.
The office said that the reports are currently not timely published after the end of the year to which they relate because they relied on the audited financial statements, which were not readily available for timely actuarial valuation.
For example, NAO underscored Actuarial Valuation Report as of 31 December 2017 was published in August 2019, “so, when pensions were reviewed, it was applied retrospectively to the active pensioners”.
“Delaying the pension increase meant that SSHFC has not timely provided the level of benefits that was aimed at protecting pensioners from the rising cost of living,” added NAO.
The NAO thus concluded that the SSHFC has not appropriately and regularly applied pension increases in the period under review as specified by the SSHFC Act, saying “these increases were also not timely provided to the pensioners for increase effective January 2019”.
According to the NAO, SSHFC’s claim that pension increase is tied to the publishing of the Actuarial Valuation Report is not consistent with the increase rates the Corporation applied.
In addition, the NAO averred it is their (NAO) view that the SSHFC Act 2015 does not require that the triennial pension increase is tied to the publishing of the Actuarial Valuation Report.
NAO said: “The pension increase decision simply uses the latest available report to determine the maximum percentage increase. Increasing pensions at different rates is justifiable and wise. However, these rates must be within the estimated rise in earnings made by the Actuary”.
In its opinion, the Board was not made aware of the limit to which it can increase pensions. Therefore, the board approved an increase that was not consistent with the SSHFC Act 2015.
NAO said, “The rate of pension increases made by SSHFC has led to the significant increase in pension costs over the years and the effect will continue.”
The Audit Office recommended that SSHFC should not increase pensions beyond the estimated rise in earnings made in the latest available Actuarial Valuation Report.”
As outlined by the NAO, when a new minimum pension is established, existing pensioners earning below the minimum pension can be moved to the new minimum pension.
According to the National Audit Office, pensioners who receive above the new minimum pensions should not earn more than the estimated rise in earnings that the Actuary made.
NAO further recommended that SSHFC should use the latest available Actuarial Valuation Report in their pension review without waiting for a new report to be published.
