PAC Report on the financial sustainability of Social Security arrangements
The Public Accounts Committee has today published its Third Report for this Parliamentary session. The report examines the sustainability – in the medium to long term – of current social security arrangements.
The Committee held a public evidence session on 5 November at which it took oral evidence from:
• Dr Aidan Harrigan, Permanent Secretary, Finance
• Mr Timothy Hodge, Director, Social Security Board
• Mr Hernando Peres Montas, Actuary, Social Security
In addition, the Committee received written evidence from the witnesses. The written evidence AND a transcript of the oral evidence has been published on the Government website: http://gov.ai/index.php
The Report
The Committee is concerned that the Social Security Board does not have a well-developed financial strategy to secure the long-term future of social security arrangements. It was not obvious to us that management can lead the Board through changing economic and social circumstances and not blame those circumstances for its failures.
The Board is paying out an increasing number of long-term benefits including pensions. The Auditors have recorded that the value of the Board’s reserves are lower in fact than the amount the Board will have to pay out in pensions now and in the future. This means it cannot guarantee that people who are working now will be able to maintain a decent standard of living in their retirement.
The Auditors have also highlighted risks to the Social Security Fund including:
• Risks to its investments from movement in the discount rate
• Risks from changes in interest rates
• Risks from changes in the mortality rates (people are living longer) of current and former employees
• Risks from increased salaries which will require larger pensions
The Board is heavily reliant on investments in Anguilla and these investments have yielded lower than expected returns following the banking crisis and the hurricane.
For example, the Committee considers that the Social Security Board is overly optimistic about the prospects for a good outcome from the purchase of the Cinnamon Reef property in 2010. This is an unsustainable investment which has yielded no returns to date. The Board should consider divesting itself of the property as soon as possible.
Moreover, this geographic concentration of its investments means that the future social security provisions, are heavily exposed to the resilience of the Anguillan economy.
The Committee also examined the procedures for awarding and assessing grants from the Social Development Fund which have been extremely beneficial to Anguilla. The Committee recommends that the Board publish successful applications and post-project evaluations on its website. The Committee also raised concerns about the proportion of those Funds which are allocated to expenditure which would normally be the responsibility of a government department. The criteria for such decisions should be made public.
About the Committee
The Public Accounts Committee was formed in 2015 to scrutinise the value for money—the economy, efficiency and effectiveness—of public spending and to hold the government and its civil servants to account for the delivery of public services. Its duties are set out in the rules of the Legislative Assembly.
The Members of the Committee are:
• Ms Palmavon Webster (Chair)
• Mrs Evalie Bradley
• Mr Paul Harrigan
Hard copies of the Report are available from the House of Assembly
For phone/radio interview please contact the Committee Chair, Ms Palmavon Webster on 235-2393
3 December 2019
