Every Papua New Guinean knows about the “Cairns Observatory” saga. Political interference and rampant corruption resulted in the near collapse of the superannuation industry in PNG. Many hard-working Papua New Guineans lost their lifetime savings. Some lost their jobs. Those who were behind the massive corrupt practises at the highest level were never brought to trial. An enquiry was done and the report fed to the rats! Growing dust somewhere in the corridors of Waigani.
Thanks to Sir Mekere Morauta and his government 10 years ago, he proposed and introduced changes to the Superannuation Act resulting in the massive double figure growths enjoyed in this sector today. The changes stopped the interference of politicians.
Now we read in The National newspaper that Mr Leon Buskens is proposing changes to the Superannuation Act. As a contributor, I want to know why. It may be premature but I certainly do not want see our savings disappear in thin air. Why the changes? Can Mr Leon Buskens explain to the hard-working Papua New Guineans in very simple language so we understand. If any changes is required, I would like the employer portion increased. Especially for Nambawan Super Ltd so that some of the windfall from the resource boom can be put back into superannuation savings of hard-working public servants by the government. I do not see the logic of proposing to increase contributions when the cost of living is taking its toll on ordinary Papua New Guineans.
Here is the proposed changes as reported in The National newspaper, Tuesday, February 11, 2011. Italics added.
“Nambawan Super had proposed changes on its services to include contribution rates, life and medical insurance, payments on compassionate ground, family super, housing withdrawals, extending the super net and RSA limited increase. It had proposed increasing compulsory contribution rates by 2%, which would move the current employee portion of 6% to 8% and the employer portion from 8.4% to 10.4%. NSL also proposed to fund members’ life insurance premiums from its profits by election by each member and with extra contributions by them and would recommend to consider the position if compulsory contribution rates were increased. It also advocated amending the legislation to allow the trustee to be able to make payments to a member on compassionate grounds, such as where the member’s immediate family is critically ill and life can be prolonged with medical treatment. It was also in favour of introducing a new product to allow fund members to have sub-accounts for their family members. These accounts would be set up on voluntary contributions.
“A culture of savings in our society will also be promoted here,” Buskens said.
“For housing withdrawals, NSL considers putting in place a formula that allows the member to use part of his or her employer contributions for this important purpose.
“In extending the super net, NSL has proposed lower contribution rate for companies employing 15 people to contribute to superannuation which provides a scope for the self-employed to contribute to superannuation.
“NSL recommended consideration of K500,000 as the revised maximum that could be held in the RSA product as it believes that as member balances continue to increase, it makes sense for RSA maximum to increase as well,” he said.
As far as I can see, the changes will not benefit contributors. It seems to me that the changes will only increase funds for Nambawan Super Ltd. I fail to see the increase in value for the contributor.
Mr Rod Mitchel., the joint CEO of Nash Fund makes some very interesting and eye-opening comments regarding the proposed changes. I fully support his stand.
Here is what Post Courier reported, Wednesday, 2nd February, 2011. Italics added.
Nasfund believes that a proposed changes to the superannuation laws were both premature and unfortunate. The proper process is through the Association of Superannuation Funds where a sub-committee will firstly determine whether there is industry support for such a move and if so what terms of reference will be suitable. Nambawan Super’s managing director Leon Buskens “scatter gun” approach to reform by publicly announcing a wish list of proposed superannuation changes without industry consultation has been described as “only muddied the waters”.
“This is further muddied by the fact that there is no official statement from the Central Bank and we doubt whether any written endorsement of this proposal exists,” Nasfund’s joint CEO Rod Mitchell said yesterday. He said in regards to increases in the proposed rates of superannuation contribution, such a move was not justifiable. Asking the majority of workers who are finding it hard to make ends meet to cough up additional compulsory employee savings of 2 per cent above the current 6 per cent will cause immediate difficulties for low-income earners such as security guards, agricultural workers and the like. “Similarly private sector employers have no interest in seeing their wages bill expand even further, having just faced a period of rising costs.
“Rising costs through higher wages because of the effect of the resource boom, minimum wage laws and currency depreciation.
“If employees wish to pay more into super from their wage packets they of course should be encouraged but not through compulsion.
“Similarly jobs are created through lowering costs, not creating additional charges,” Mr Mitchell said. He said the public sector may argue for increased employer contributions but with more than K2 billion in unfunded liabilities already owed to Nambawan (bold and underline added), he was sure Treasury was in no mood to fund this additional largess – especially when the politicians and community were almost daily complaining about the current levels of public service productivity and lack of accountability. “Some of the other changes mooted can be done adequately through prudential standards as determined by the Central Bank in consultation with the industry. “In summary, loose talk is not what we want and often has unexpected consequences. “Any change to the Superannuation Act if deemed required, must be measured and should be initiated cautiously through the Association,” Mr Mitchell said.
Is Leon Buskens asking contributors of Nambawan Super Ltd to increase their contributions (rather making it compulsory by amending the law) because the government owes it more than K2 billion kina?
Rod Mitchell, I am with you.
UPDATE 3rd Februray 2011
Report in The National newspaper, Thursay, February 3rd, 2011. Italics added
Chamber cautions super fund review bid
THE Port Moresby Chamber of Commerce and Industry has reacted cautiously to the recent announcement by Nambawan Super asking for a review of the Superannuation General Act 2000. Business was always cautious when such surprise announcements pop up in the newspapers, and there seemed to be no indication that the other major player, Nasfund, which represented most of our workers, was in total agreement with the call for change, the chamber said in a statement released yesterday.
It said: “Reviews are good and, certainly ten years on, it may be timely, but the superannuation industry appears to be extremely healthy and, in fact, during the global financial crisis, the PNG industry out-performed funds in Australia and much of the developed world. “Change for the sake of change may be counter-productive. “We would like to see more consultation through the wider community before such pronouncements appear in the media.
“NSL is predominantly public service, so calls to increase employer and employee rates is all very well when you are not paying the actual money.
“It is our employees and our members who will pay any increase in rates directly out of their wage packets,” the chamber said.
“The average urban worker is struggling now and a couple of percent in extra super could be something he will not welcome at this juncture.
“Also, not all businesses are making huge profits from the upcoming L NG project bonanza and its spin-offs.” The statement said that inflation was also starting to run with costs rising in all areas. “Credit is harder to get so, while it is easy to say it is only a few kina on the individual fortnightly pay packet, in large employers, multiply that by thousands of workers and the money has to come from somewhere. While it welcomed control of the central bank in the matter, the chamber “urged a considered, consultative approach before any major changes are contemplated”.