Marshalls Govt moves to try save country's pension fund

Transcript

The Marshall Islands government is looking at solutions to prevent the collapse of the country's pension fund.

The Marshall Islands Social Security Administration, or MISSA, says it's in a very serious crisis and if no action is taken the fund will be bankrupt by 2023.

Our correspondent in the Marshall Islands told Indira Moala that among the proposed changes is an increase to the age of retirement and a reduction of beneficiary payments by 22 per cent.

GIFF JOHNSON: The fundamental problem in the Marshall Islands is that beneficiary payments are continuing to go up, this year they will hit about 20 million, and the tax revenue is flat at about 13 million. So right there there's a 7 million dollar deficit which just gets bigger and bigger every year and the trust fund is only a little over 50 million dollars. And so that's why if things keep going the way they're going, the fund would be bankrupt in 7 years.

INDIRA MOALA: That annual deficit of 7 million dollars has slowly been increasing to that point and will continue to grow if these changes aren't made, was the possibility of a collapse highlighted at any time earlier in the past?

GJ: The Marshall Islands Social Security Administration has been bringing up this issue now I believe for 6 or 7 years. And this has been beginning to play out for the past few years. So yes, the Social Security administration here has been very proactive in putting this out - what the impending problem is. And it shows you how difficult it is to get government to jump in and support reform that may be politically challenging for them. It's certainly been on the table for awhile - just government administrations here over the past few years just have not been willing to deal with the reforms that have been called for by the retirement fund.

IM: That 22 per cent reduction in beneficiary payments, which you have explained is the best option at this stage, what kind of an impact is that going to make on those beneficiaries?

GJ: The beneficiary payments in the Marshall Islands range from a low of about $150 a month up to maybe $1100-$1200 a month I believe. And I'm pretty sure that they're trying not to impact the very low end amounts but essentially, someone who's getting a thousand dollars would get about $800 dollars if this goes through. And so yes, it's going to impact people but you know, on the flip side of it is - do we want to see it continuing on beyond 2023 and you know, it just gets worse every year as nothing gets done and the deficit widens.