Central Bank Aruba to approve recovery plan

July 22, 2012 8:59 AM

ORANJESTAD — After lengthy negotiations, pension fund Apfa and the government reached an agreement whereby the government will repay a debt of 626 million florins within fifteen years for the pension scheme NPR2011.

This means among other things that as employer the government will pay 3 percent more premium, namely 31.1 percent in total, to ensure a 100-percentage of cover percent of the fund.

Apfa, Premier Mike Eman (AVP) and Minister of Finance Mike de Meza (AVP) signed the agreement, the so-called implementation agreement, yesterday. In January 2011, the NPR2011 was introduced as successor of the PVL-regulation (final loan regulation) that had been too expensive for years. However, this new regulation didn’t provide sufficient percentage of cover due to the enormous deficit of the old regulation. Apfa and the government therefore agreed on a recovery plan, which plan is required by the Central Bank of Aruba under whose supervision the pension fund falls since 2011.

However, both parties entered into a discussion while drawing up the recovery plan because the government indicated that repayment of the debt in ten years would make a huge hole in the government’s finances. The parties also disagreed on the guarantee stipulations. Apfa wants the government to also stand surety for new deficits that could arise in the recovery period. Press reports from the pension fund and the government yesterday, and through Apfa-spokesperson Jennifer Jacobs, now reveal that the government will be given fifteen years to repay the debt of 626 million florins. Moreover, the government will stand surety for the old deficits during the PVL-regulation and ‘other deficits that could arise during the recovery period’, according to Apfa. The government will also stand surety for the payment of the increased premium in 2010, said Jacobs. At the time, the total premium reached an unprecedented record height of 68.2 percent (previously 41.1 percent) of which the government as employer had to pay approximately 60 percent.

The total pension premium for the NPR2011 is currently 33.1 percent of which the employees (civil servants and semi-officials) pay 5 percent and the government the remaining percentage. With the sealed agreement yesterday, the government agreed to pay 3 percent more on premium, amounting to 31.1 percent in total.

According to Jacobs, this becomes effective immediately. For that matter the Central Bank is yet to approve the recovery plan. Apfa will provide more details on this plan and publish such on their website after the Central Bank has approved aforementioned plan. However, in their press report, the government stated that the Bank had already approved the calculations and the recovery period of fifteen years. According to Premier Eman, the pension fund is ‘so solid’ that the Central Bank ‘feels at ease’ with the developments of Apfa and the recovery plan and for that reason approved such.

Apfa further published the figures of the net percentage of cover at the end of the second quarter. This was 75.1 percent for the NPR2011 at the end of June, compared to 73.9 percent at the end of March. This recovery is partly due to better investment results in the first quarter. The pension capital was 2.077 billion florins at the end of June.

(Amigoe)