Rebuild savings, IMF tells FNPF
20 February, 2019, 11:14 am
THE International Monetary Fund has recommended the Fiji National Provident Fund (FNPF) rebuild and increase its savings to mitigate the $275.5 million impact of Severe TC Winston withdrawals in 2016.
Following the aftermath of the monster cyclone, about 180,000 FNPF members withdrew up to 30 per cent of pension savings or about 2.8 per cent of the GDP.
Withdrawals for TC Winston as reported in the FNPF 2017 annual report was $275.5m, however, total withdrawals for that financial year was $564.7m if you include migration, death, special death benefit, migration, housing and disability.
Members’ contributions for that financial year was $546.2m.
“This measure was effective in mitigating the adverse impact of Winston on many households. However, it is also important to lay out a strategy to restore these pension savings to ensure that contributors will eventually have access to adequate pensions, especially given that a large fraction of pension members have relatively low pension saving balances at present,” the report by the IMF on Fiji said.
According to the fund in its discussions with Fiji authorities, there was no plan to take measures to restore pension savings in the near term.
However, the mandatory increase of pension contributions from 16 per cent to 18 per cent should help compensate for the withdrawal of pension savings in the aftermath of several cyclones in recent years.
“Low levels of pension savings could jeopardise the adequacy of pensions for a large fraction of contributors,” the report said.
“Although, allowing pension savings withdrawals was effective in containing the adverse impact of Winston on many households, it is also important to safeguard adequate savings for retirement.”
The IMF report on Fiji is based on its visit to the country in December last year.