By NATARIO McKENZIE

Tribune Business Reporter

nmckenzie@tribunemedia.net

THE Central Bank of the Bahamas said yesterday it was facing an “unstustainable” employee pension contribution rate of 20 per cent, following strong union objections over recent adjustments made to it.

Melony Munnings, president of the Union of Central Bankers, told Tribune Business the pension issue arose last December, and charged that the regulator had made amendments which were not put before the union.

Yet the Central Bank, in a statement yesterday, said that while it was aware of the union’s objections, it denied thatthe decision was a unilateral one, taken without proper consultation.

It added that the existing defined benefit plan, where the Central Bank contributed 100 per cent of the monies with no staff contribution, was simply too burdensome. Contribution rates were as high as 20 per cent of an employee’s annual salary.

“Following a fundamental change in the Plan design (the removal of the integration clause with the National Insurance benefits), mandated by the staff, among other cost factors, the Bank is now faced with a double-digit contribution rate of over 20 per cent, which is clearly not sustainable or reasonable,” the Central Bank said.

“Like any responsible employer, the Bank, at the very outset of the design change, made staff and the unions aware that measures needed to be pursued to bring these costs back into an acceptable range.”

It added: “Consistent with the Bank’s approach to these matters, a consultative process was launched in May 2011, with full engagement of all parties, and transparency. Various options for achieving the cost reductions were developed by the Bank, and presented for the consideration of the unions and staff, and the Bank believes that the decision taken allows for the least change outcome in employees’ original expectations.

“As a responsible institution, the Bank takes its obligations to employees seriously, and would never make arbitrary or capricious decisions. The Bank acknowledges that this subject matter is highly sensitive, which correlates with the extensive consultation period permitted—of nearly three years.”

In an interview with Tribune Business, Ms Munnings called for government intervention in the dispute, warning the union was prepared to create a Central Bank shutdown, but only if necessary.

“We were in discussions with the Bank, but the final decision that went forward for approval was not presented to the Bank nor the staff, and it’s really adverse,” Ms Munnings said.

“It really puts the staff in a very bad position. It is not one that the union would have agreed to, and we would have had our own counter proposal to it had it been tabled properly, but it was not.”

She added: “They’re reducing it [the pension] drastically. It’s already small and to reduce it even further is definitely not good. Persons at this stage, when they retire, would be looking for more because as you get older you face more complications.

“This has caused a lot of panic among staff, especially those persons who are retired and already struggling, but the impact is greater for current staff because they are changing the way the calculation has been done in the past.”

Ms Munnings said: “The takeout amount you would have been allowed to take out was 50 per cent of your pension in a lump sum, and leave 50 per cent to receive as a a monthly income.

“Now the Bank has increased that to 75 per cent of your money, and you will only live on a pension of 25 per cent, which means that your pension will be far less than those persons who are currently retired because you will be required to take out and manage it yourself. You cannot live comfortably on 25 per cent.”

Ms Munnings said there were roughly 50 former Bank employees receiving a pension, and one employee scheduled to retire next month.

As to what action the union was prepared to take, Ms Munnings said: “We have a series of actions. We want the Government to intervene. I don’t think the union wants to fully shut down the Central Bank. That will have serious implications for the country, but if it has to go to that then they’re prepared to go that far.”

The Union of Central Bankers and the Central Bank were recently at odds over a new industrial agreement, which led to an Industrial Tribunal ruling that the term “two weeks” in the Employment Act as it related to vacation pay really meant 14 working days, and ‘three weeks’ meant 21 working days.

That decision was subsequently quashed by the Court of Appeal which found that its president, Harrison Lockhart, “went on to determine something that was not before him”, and “enlarged the issue”.