Time is running out for your pension - Curacao on the eve of a new social security system

June 10, 2012 12:45 PM

CURACAO - The social security system needs to be reformed drastically. During the last Fatum Pensioen- en Bedrijvendag 2012 (literally: Pension and Company Day) this became clear. This year, the reform was also the main topic. A reform which means facing some challenges, but which is also accompanied by a lot of myths. The question is, what can the people of Curacao expect?

Myths
Dr. Steven Martina, CEO of Fatum, kicked off on this Fatum Pensioen- en Bedrijvendag and immediately focused on the most important myths (partially or completely untrue stories that contain a moral) that surround our social security system. For starters, the aging of the population is a challenge. Life expectancy is rapidly increasing and that means that the myth of retiring at age 60 is outdated. The new pension age is 65, and on that age you will probably not get a monthly income of 70 percent of your last salary, so that myth is untrue too. For companies, these changes have a great impact. The age of employees will increase, and those older employees won’t be less productive. With that statement, Dr. Martina contradicts another important myth. Older employees have knowledge that companies can put to good use.

One thing has become clear: as a consequence of developments like aging and increasing health care costs, a change is needed. And fast. A change which can’t be incremental. So forget the myths that there is enough time and that change can happen gradually. We must take action now.

Pressure
Drs. Victor Monk confirms the necessity for change. The AOV fund is in depth, the unemployment rate is high while the economy barely grows, and the monthly costs on Curacao are among the world’s highest. These are just some of the bottlenecks in our modern day society. The goal is to come to a socially acceptable and affordable pension plan, with which people can be the boss of their own lives for as long as possible, within this current situation. At the moment, there is a proposition for reform which will have the AOV fund going bankrupt within twenty years.

The realization also gives some food for thought. Everyone who was 57 years or younger at 1-1-2012, will have to continue working for five more years than they have been told up until that date. Why is there no transition period? If these people decide to retire at age 60, they will be cut down 30 percent on their pension. Why do we punish these people so hard? By the end of 2025 there will be a surplus of 125 million guilders, so there is no long term necessity to do so.

To decrease the pressure, the whole community of Curacao will have to help. Dr. Martina showed in his presentation that the proposed reform will eventually lead to a more financially healthy country with the national reserves showing a surplus of 116 million guilders at the end of 2030. But to accomplish this, the (social) costs for the employer will relatively increase by 30 percent, while the directly available income of the employee will decrease. This situation asks a lot of both employer and employee. However, by working together and combining forces, this goal can be reached and everyone can spend their latter days carefree.

Aruba
Our neighboring island Aruba has already gone through a few reforms regarding social security.  For instance, in the beginning of this year, a mandatory pension scheme was introduced. Klaas Tuinstra, a former Dutch politician, had an important role as an advisor during the implementation of this system. The island, just like Curacao, experienced some bottlenecks, such as large differences in pension ages, no extra financial space in the country budget for extra costs, and a gap between government and society. Furthermore, the bottom of the SVB fund would be reached within a few years. The challenge was to convince the people of the reform and the necessary increase in costs which it would bring.

The base for a successful implementation of the mandatory pension scheme on Aruba was the social dialogue. Representatives of the employers, employees, and government sat down together and reached a consensus within a little over one and a half month. The so called Flex AOV doesn’t incorporate a penalty scheme like on Curacao, where employees are cut down six percent for each year they retire before 65. Instead, they introduced a stimulant, meaning people who work longer can earn up to 40.2 percent extra AOV. But the most important fact is that Aruba has reached an agreement for a mandatory pension scheme which is supported by employers, employees, and the government. An important step for Aruba, which contains a valuable lesson for Curacao.

Anticipate
The new pension system is just one of the many changes which entrepreneurs can already respond to. The extent to which entrepreneurs respond to such changes is a key value of business excellence. Robbert Kroon explained to entrepreneurs why change is sometimes necessary. For example, because of rising costs of social services, but also pressure from clients, stakeholders, or the government could be the reason. If you adapt on time, you can keep up with your changing environment and avoid risks as much as possible.

As a Manager General Insurance at Fatum, Berry Verkaar, the final speaker of the day, is continuously involved in risk management. Estimating and reducing risks as well as dealing with them, are part of the daily business of Mr. Verkaar. As an entrepreneur, it is important to list your risks and know how to deal with them: prevent, reduce, transfer, or keep. By finding the right way to deal with risks, you can avoid major financial blows.

Advice
For a thorough analysis of your company risks and advice on dealing with these risks, you are welcome at Fatum. Also, contact our friendly experts for advice about your pension. Call the Fatum Pension Desk for an appointment at 777-7177 or visit our office at the Cas Coraweg Curacao.