Govt. told to tighten belt

A Parliamentary Committee has told government to tighten its belt in regards to its own pension scheme.

In its report on the Annual Reports of the Parliamentary Pension Scheme for the financial years ending on June 30 in 2011 and 2012 respectively, the Officers of Parliament Committee (O.P.C.) noted that an outside expert offers recommendations on the scheme’s financials as there is no local qualified to carry this out.

The Chairman of the Committee is Muagututagata Peter Ah Him. “At the moment the Management and the Board of Directors are exploring other options for investment to ensure sustainability of maximum returns for P.P.S. funds,” the report reads.

“The issue countering long term options for investment is the fact that the Parliamentary term of five years is considered short term. “The calculation of the Pension is carried out by an expert and is based on current assets and the average life expectancy of a member. “From these calculations, the expert offers recommendations on the financials of the scheme and the amount of Government funds to support the scheme within the limits of the governing legislations.” The Committee reported that the Management submitted if there were sufficient assets, the Government can decrease its financial assistance.

“However, if there are not enough assets then the Government will have to finance the scheme,” says the O.P.C. “At the moment, the appropriations are sufficient to fund the scheme and the services of the expert.

“Member’s contribution stands at $3 million compared to Net Assets available of $5 million which indicates a surplus. “Advantages of the scheme include a low 3.5 per cent interest and the members are also entitled to 5 per cent of their contribution twice a year as required by Legislation.

“The purpose of the scheme is for Members to have financial backing when they retire from Parliament. “The Board is still considering ways to develop the scheme. “The Committee noted that there is no local that has pursued a degree in this field to carry out an advisory role in regards to pensions.

“The Committee believes that it is fitting that the Government sponsor candidates to pursue education in this field in order to discontinue employing overseas assistance which will also conserve finances,” according to the report. “The Board has submitted that there is a proposal to prepare annual contribution statements for the information of the Members on their balances.”

At the end of the report the O.P.C. made one recommendation to the Legislative Assembly. “(To) Consider overseas educational opportunities for our students in the field of administration of pension schemes. “It is also appropriate that this discipline be encouraged and offered at the National University of Samoa to prevent the employment of overseas consultants and in turn save finances.”

In addition to Muagututagata, members of the Committee are Taefu Lemi as Deputy Chairman, Agafili Patisela Eteuati Tolovaa, Aeau Peniamina Leavaiseeta, Papaliitele Niko Lee Hang, Motuopuaa Aisoli Vaai and Toeolesulusulu Cedric Pose Salesa Schuster. The report is republished in full below:

1. RECOMMENDATION:- The Officers of Parliament Committee recommends that the Assembly take note of its Report.

2. PREAMBLE:- The Officers of Parliament Committee is constituted under the provisions of Standing Order 179: 3. STANDING ORDER 179:- As prescribed by Standing Order 179, it shall be the duty of the Committee to consider the Reports of the Komesina 0 Sulufaiga and the Reports of the Controller and Chief Auditor.

4. PAPER CONSIDERED:- (Presented 31/5/2012) (Referred 6/6/2012) 1. P.P. 2012/2013 No. 5, Annual Report of the Parliamentary Pension Scheme for the Year 2010/2011 (Presented 30/5/2013) (Referred 31/5/2013) 2. P.P. 2013/2014 No. 2, Annual Report of the Parliamentary Pension Scheme for the Year 2011/2012

5. WITNESSES:- During the course of its investigations, the Committee was able to hear evidence submitted by: National Provident Fund (NPF) Faumuina Esther Lameko - Chief Executive Officer Amituanai Ala T. Fuimaono – Manager Parliamentary Pension Scheme

6. FINDINGS:- The Parliamentary Pension Scheme’s administrator negotiated with the local banks regarding interest rates to ensure the schemes funds are invested with banks offering the highest interest rates. The majority or 76% of the schemes funds is being invested with the Samoa Commercial Bank since it has offered the highest interest rates ranging from 3.5% to 3.75%. However for the Financial Year 2011/2012, term deposits interest rates have slightly increased amongst the local commercial banks averaging at 3.6% to 4.5% per annum whilst an interest rate of 5% per annum is being offered by the Unit Trust of Samoa.

During the 2011/2012 Financial year, 54% of the Schemes funds was invested with the Samoa Commercial Bank, 43% invested with the Unit Trust of Samoa, 3% with the National Bank whilst 2% was invested with the Westpac Bank.

The task was not without challenges given the continued adverse effects of the economic crisis on term deposit rates for the past years. Considering the continuing decrease of Banks interest rates offered for Term Deposits, the Parliamentary Pension Scheme Board upon the advice by the Actuary, resolved to reduce the interest from 5% to 3%, effective October 31st 2010, credited to PPS members accounts in compliance with PPS Amendment Act 2012 — Clause 5 (e) which states; 5. Powers of the Board — The Board shall have the power to:- (e) declare a credited interest rates at the beginning each plan year, Provided that the Board shall not declare a rate that exceeds the rate forming part of the assumptions used by the actuary under this Act. At the moment the Management and the Board of Directors are exploring other options for investment to ensure sustainability of maximum returns for PPS funds. The issue countering long term options for investment is the fact that the Parliamentary term of five (5) years is considered short term.

The calculation of the Pension is carried out by an expert and is based on current assets and the average life expectancy of a member. From these calculations, the expert offers recommendations on the financials of the scheme and the amount of Government funds to support the scheme within the limits of the governing legislations. The Management submitted that if there were sufficient assets, the Government can decrease its financial assistance. However, if there are not enough assets then the Government will have to finance the scheme. At the moment, the appropriations are sufficient to fund the scheme and the services of the expert.

Member’s contribution stands at $3million compared to Net Assets available of $5million which indicates a surplus. Advantages of the scheme include a low 3.5% interest and the members are also entitled to 5% of their contribution twice a year as required by Legislation.

The purpose of the scheme is for Members to have financial backing when they retire from Parliament. The Board is still considering ways to develop the scheme. The Committee noted that there is no local that has pursued a degree in this field to carry out an advisory role in regards to pensions.

The Committee believes that it is fitting that the Government sponsor candidates to pursue education in this field in order to discontinue employing overseas assistance which will also conserve finances. The Board has submitted that there is a proposal to prepare annual contribution statements for the information of the Members on their balances. Financial Statements: For the Year 2012 SAT$1,025,740 was expended on the scheme compared to the SAT$2,711,054 in the previous year.

This is a decrease of 62% which is attributed to the decrease in contributions being withdrawn to 64% and the decrease in expenditure on implemented work outputs to 20% in 2012. There was also a decrease in the funds paid out to the Advisor in 2012 from SAT$l2,314 in 2011 to SAT$3,572 in 2012.

This was due to the passing of the first advisor and the work for 201 1 was delayed and completed in 2012 to be reported in the next financial year. Member’s contribution balances as at end of June 2012 stands at SAT$3.5million compared to Net Assets available of $5.2 million with a surplus of SAT$l.5million of 41% respectively. However, members contribution as at end of June 2011 stands at SAT$3.4million compared to Net Assets available of $4.7million, a surplus of SAT$l.3million or 37% respectively.

An approved appropriation of SAT$52,000 is paid to the National Provident Fund for the management of this scheme. This is a saving of SAT$l8,000 compared to the SAT$70,000 that was paid to a private company that previously managed the scheme. The Committee records its acknowledgment to the Board of Directors and the Management of the National Provident Fund for the administration of the Parliamentary Pension Scheme especially in considering investment options for the scheme. Gratitude is also in order for the timely completion of the Annual Report and Financial Statements pursuant to legislations.

7. RECOMMENDATION:- At the conclusion of its findings, the Committee recommends that the Government - 1. Consider overseas educational opportunities for our students in the field of administration of pension schemes. It is also appropriate that this discipline be encouraged and offered at the National University of Samoa to prevent the employment of overseas consultants and in turn save finances.

8. RESOLUTION:- At the conclusion of its considerations, the Committee resolved to recommend that the Assembly:- Approve P.P. 2012/2013 N0. 5, Annual Report of the Parliamentary Pension Scheme for the Year 2010/2011 and P.P. 2013/2014 No. 2, Annual Report of the Parliamentary Pension Scheme for the Year 2011/2012

MUAGUTUTAGATA Peter Ah Him CHAIRMAN