FACTS, FIGURES AND

CHALLENGES

FNPF REVIEW OF THE ACT AND

PENSION CHANGES SYMPOSIUM

Friday 13th May, 2011

Private Mail Bag, Suva. Telephone: 330 7811. Fax: 330 7611. Website: www.myfnpf.com.fj All correspondence to be addressed to the General Manager & Chief Executive.
 PRESENTATION OUTLINE

1. Objectives
2. Background
3. Facts and Figures
4. Key Challenges
5. Reform Updates
6. Conclusion

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 1. OBJECTIVES

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 OBJECTIVES

To provide an update on the current status

of FNPF:
i) Background information as a context
on the need for Reforms
ii) Discuss the challenges and the
Reforms currently undertaken

Private Mail Bag, Suva. Telephone: 330 7811. Fax: 330 7611. Website: www.myfnpf.com.fj All correspondence to be addressed to the General Manager & Chief Executive.
 2. BACKGROUND

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 BRIEF HISTORY
 1966: FNPF established under Government Ordinance
No. 19 with contribution at 5 pence

 1969: Contribution Rate increased from 5 pence to 10 cents

in the new decimal system

 1970:
 Special Death Benefit Scheme introduced
 Voluntary Membership Scheme introduced for Self-
Employed persons

 1975: Pension Scheme Introduced

 Pension Conversion Rate of 25%
 Pension Buffer Introduced (deduction of 2c)

 1976: Housing Assistance introduced

Private Mail Bag, Suva. Telephone: 330 7811. Fax: 330 7611. Website: www.myfnpf.com.fj All correspondence to be addressed to the General Manager & Chief Executive.
 BRIEF HISTORY
 1979: Contribution Rate increased to 14c

 1992: Total Assets exceeded $1b for the first time

 1998: First Pension Reform Proposed

 1999:
 Regressive reduction; Sole Pension from 25% to 15%
and Joint Pension from 16.4% to 11% (by 1% annually
for a 10 year period)
 Removal of deduction into the Pension Buffer Fund
 Redirection of 2c Pension Fund deduction to Members
Account

 2003: ILO Report - The annuity factor should be adjusted

from 25% to 10% over a 10-year phasing in period, and
subject to a review every year; 5 years

Private Mail Bag, Suva. Telephone: 330 7811. Fax: 330 7611. Website: www.myfnpf.com.fj All correspondence to be addressed to the General Manager & Chief Executive.
 BRIEF HISTORY

 2004: Prudential Supervision by RBF started

 2005: Amendment to the FNPF Act

• Removal of restrictions imposed by the Trustee Act on its
investments
• Broadened membership coverage by reducing minimum
voluntary age to 15 years

 2006: World Bank Report - FSAP

• Put Pension business on sound actuarial footing

 2008: Pension rate maintained at 15% since

 2009: PM mandated the current Reform Program

Private Mail Bag, Suva. Telephone: 330 7811. Fax: 330 7611. Website: www.myfnpf.com.fj All correspondence to be addressed to the General Manager & Chief Executive.
 3. FACTS & FIGURES

Private Mail Bag, Suva. Telephone: 330 7811. Fax: 330 7611. Website: www.myfnpf.com.fj All correspondence to be addressed to the General Manager & Chief Executive.
 FNPF AT A GLANCE

…about the size of

Commercial Banks combined

Commercial Total Financial System:

8%
Banks $10.6b
Credit
institutions  FNPF: $3.6b
44% Insurance 35% of Financial System
35%
companies

FNPF Banks $4.5b

 44%
NBFIs

9% 4% Total GDP: $5.9b

FNPF Percentage of
Source: RBF
GDP- 61.02%
Securing your Future
 FACTS & FIGURES

Graph 1: FNPF Membership vs. Fiji’s Labour Force

400,000

Student voluntary
350,000
membership
registration drive
300,000

250,000

200,000

150,000

100,000
Active Member Labour Force
50,000

Private Mail Bag, Suva. Telephone: 330 7811. Fax: 330 7611. Website: www.myfnpf.com.fj All correspondence to be addressed to the General Manager & Chief Executive.
 FACTS & FIGURES
Graph 2: Contributions vs. Withdrawals
400

2009: Flood
350
Total Payout (Withdrawals + SDB + Pension) Assistance
Contribution
300

250
2003: Cyclone
Ami assistance
$ Millions

200

150

100
1988 Coup: “$500
Scheme” Pay Reduction
50

1996

2004
1966
1967
1968
1969
1970
1971
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995

1997
1998
1999
2000
2001
2002
2003

2005
2006
2007
2008
2009
2010
Private Mail Bag, Suva. Telephone: 330 7811. Fax: 330 7611. Website: www.myfnpf.com.fj All correspondence to be addressed to the General Manager & Chief Executive.
 FACTS & FIGURES

Graph 3: Benefit Payments vs Full Withdrawals

$350

$300
Benefit Payments Full Withdrawals
$250
Millions

$200

$150

$100

$50

$-
1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010

Private Mail Bag, Suva. Telephone: 330 7811. Fax: 330 7611. Website: www.myfnpf.com.fj All correspondence to be addressed to the General Manager & Chief Executive.
 FACTS & FIGURES

Graph 4: Assets vs. Members’ Balances

4
FNPF Total Assets Member's Balance
3.5

2.5
$ billions

1.5

0.5

0
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Private Mail Bag, Suva. Telephone: 330 7811. Fax: 330 7611. Website: www.myfnpf.com.fj All correspondence to be addressed to the General Manager & Chief Executive.
 FACTS & FIGURES
Graph 5: Total Investment Portfolio

$4.00

$3.50
2008: IFRS
$3.00

$2.50
Billions

$2.00

$1.50

$1.00

$0.50

$0.00
1978

1988

1998
1968
1969
1970
1971
1972
1973
1974
1975
1976
1977

1979
1980
1981
1982
1983
1984
1985
1986
1987

1989
1990
1991
1992
1993
1994
1995
1996
1997

1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
Total Investment Portfolio

Private Mail Bag, Suva. Telephone: 330 7811. Fax: 330 7611. Website: www.myfnpf.com.fj All correspondence to be addressed to the General Manager & Chief Executive.
 FACTS & FIGURES

Graph 6: Investment Income vs Interest Credited to Members

$300
Total Interest Credited to Members Account Total Investment Income
$250

Offshore Investment
$200
repatriation
Millions

First year of Offshore

$150
Investment

$100

$50 ATH Shares Acquisition &

Overseas Stock market
volatility
$0

Private Mail Bag, Suva. Telephone: 330 7811. Fax: 330 7611. Website: www.myfnpf.com.fj All correspondence to be addressed to the General Manager & Chief Executive.
 4. KEY CHALLENGES

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 SUSTAINABILITY OF THE CURRENT
PENSION SCHEME
Graph 7: Pension Income vs Pension Payment

Pension Income $M Pension Paid out $M

47.0
43.0
41.0
37.0 38.0

31.7

26.1 26.9
23.8 25.0
22.8 22.7 22.6 22.0
21.5 21.3 20.9
20.1

14.5 14.7

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Private Mail Bag, Suva. Telephone: 330 7811. Fax: 330 7611. Website: www.myfnpf.com.fj All correspondence to be addressed to the General Manager & Chief Executive.
 SUSTAINABILITY OF THE CURRENT
PENSION SCHEME
Graph 8: Pension Buffer Balance vs Pension Payments

$250

Pension Buffer Reserve Pension Payout

$200
Projection for June 30th 2011

$150
Millions

$100

$50

$-
1981

2000

2011
1975
1976
1977
1978
1979
1980

1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999

2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
Private Mail Bag, Suva. Telephone: 330 7811. Fax: 330 7611. Website: www.myfnpf.com.fj All correspondence to be addressed to the General Manager & Chief Executive.
 SUSTAINABILITY OF THE CURRENT
PENSION SCHEME
Graph 9: Present Value of Reserves and Obligations

80%
Assets
60% Implicit liabilities
Solvency gap
induced by non-
40%
sustainable
conversion rates
20%

0%
2006 2016 2026 2036 2046 2056

Source: World Bank 2008

Private Mail Bag, Suva. Telephone: 330 7811. Fax: 330 7611. Website: www.myfnpf.com.fj All correspondence to be addressed to the General Manager & Chief Executive.
SUSTAINABILITY OF THE CURRENT
PENSION SCHEME
Graph 10: Return on Investment vs Pension Conversion Rate

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ENSURING FINANCIAL SECURITY
ON RETIREMENT
Table 1: Pension Take-up Rate
No. Eligible for New No. of Pension Take-
Financial Year
Pension Pensioners Pensioners up Rate (%)
2000 2107 569 4,599 27
2001 1540 406 5,005 26.36
2002 4482 986 5,991 22
2003 966 338 6,329 35
2004 2043 756 7,085 37
2005 2564 718 7,803 28
2006 2808 702 8,505 25
2007 4099 635 9,140 15.49
2008 3107 650 9,790 20.92
2009 3021 561 10,351 18.57
2010 2769 453 10,804 16.36
Private Mail Bag, Suva. Telephone: 330 7811. Fax: 330 7611. Website: www.myfnpf.com.fj All correspondence to be addressed to the General Manager & Chief Executive.
 DIVERSIFICATION OF INVESTMENTS
Graph 11: Asset Allocation

8%
6.75% 5.20%
5%

9.03%
65% 17%
71.67%
2.31%

5.05%
3%
2%

Governement/Quasi Govt Commercial Loans

Government/ Quasi Govt. Commercial Loan
Other Fixed Income Equity Fixed Income Equtities

Property Cash Property Cash

• Total investment assets held under “the Fund” at • Total investment assets held under “the
June 2010 stood at $3.43b. Fund” at March 2011 stood at $3.70b.
Private Mail Bag, Suva. Telephone: 330 7811. Fax: 330 7611. Website: www.myfnpf.com.fj All correspondence to be addressed to the General Manager & Chief Executive.
 NEED FOR REFORM
Graph 12: General Reserve Balance
$800

$700

$600

$500
Millions

$400
Write down

$300

$200

$100

$0

General Reserve
Private Mail Bag, Suva. Telephone: 330 7811. Fax: 330 7611. Website: www.myfnpf.com.fj All correspondence to be addressed to the General Manager & Chief Executive.
 WAKE UP CALL
2009: Impairment of about $327 million of
Fund’s investment portfolio
• Raised the urgent need for major
structural reforms
• Critical assessment of how the Fund
conducts its business – governance
and transparency
• Need to overhaul internal processes,
procedures and systems

Private Mail Bag, Suva. Telephone: 330 7811. Fax: 330 7611. Website: www.myfnpf.com.fj All correspondence to be addressed to the General Manager & Chief Executive.
 WAKE UP CALL

REFORM PROGRAM OBJECTIVES

• To Deliver excellent services and

• To Ensure sustainable returns

Private Mail Bag, Suva. Telephone: 330 7811. Fax: 330 7611. Website: www.myfnpf.com.fj All correspondence to be addressed to the General Manager & Chief Executive.
 REFORM PROGRAM 2010 - 2013
Reform Category Reform Project
STRUCTURAL Pension
Review of the FNPF Act
Contribution, Collection & Coverage
Review of Withdrawal Grounds
External Financial Literacy
INVESTMENT Rehabilitation of Investment Projects
OPERATIONAL Information Technology Review
Business Process Re-engineering
Strengthening Training & Capabilities
Performance Management Review
Leadership
Group Shared Services & Corporate Governance

Private Mail Bag, Suva. Telephone: 330 7811. Fax: 330 7611. Website: www.myfnpf.com.fj All correspondence to be addressed to the General Manager & Chief Executive.
 CORPORATE STATEMENTS
Reviewed in 2010 to drive the Fund’s Reform
VALUES
VISION
“SECURING YOUR FUTURE” Accountability

Fairness

MISSION Team Work

“TO DELIVER EXCELLENT
SERVICES AND ENSURE Integrity
SUSTAINABLE RETURNS FOR
STAKEHOLDERS”
Innovation

Excellence

Private Mail Bag, Suva. Telephone: 330 7811. Fax: 330 7611. Website: www.myfnpf.com.fj All correspondence to be addressed to the General Manager & Chief Executive.
 5. REFORM UPDATES

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 STRUCTURAL REFORM UPDATES

Reform Project Current Update

Review of Withdrawal 1) Reduction of Withdrawal Grounds from 22 to 16
Grounds 2) Revision of criteria for the existing grounds to
reduce abuse and ensure that it meets the needs
and add value under the respective ground

Contribution, Collection 1) Revised penalties, to act as a deterrent, on

& Coverage defaulting employers
2) Explored avenues to proactively ensure FNPF
contributions are collected

External Financial Literacy 1) To promote financial literacy for students at a

younger age
2) MOU with Ministry Education on (i) developing
the curriculum (ii) training cost for the teachers

Private Mail Bag, Suva. Telephone: 330 7811. Fax: 330 7611. Website: www.myfnpf.com.fj All correspondence to be addressed to the General Manager & Chief Executive.
 INVESTMENT REFORM UPDATES

Rehabilitation of Investment Projects

NATADOLA 1) Hotel is performing ahead of budget
2) Received $7m so far from the hotel and started paying
back loan to FNPF
3) Restructured term debt to start repayment from July
4) Strategic Plan and feasibility for residential
development - In progress
GRAND 1) Finalizing detail drawings, costing etc with new JV
PACIFIC HOTEL partners
2) Construction targeted to commence in July 2011

MOMI 1) Finalizing the short-list for Hotel Operators

2) Will complete project to recover capital
3) Option to find a buyer or JV partner is still open

Private Mail Bag, Suva. Telephone: 330 7811. Fax: 330 7611. Website: www.myfnpf.com.fj All correspondence to be addressed to the General Manager & Chief Executive.
OPERATIONAL REFORM UPDATES

Reform Project Current Update

Information Technology 1) New Administration System
Review - Evaluation has commenced to be completed
by July 2011
- System to go live by April 2012

2) Project Management Office currently being

established

Business Process 1) Operational processes review to be completed

Re-engineering by June 2011
2) Support functions review by December 2011

Private Mail Bag, Suva. Telephone: 330 7811. Fax: 330 7611. Website: www.myfnpf.com.fj All correspondence to be addressed to the General Manager & Chief Executive.
 6. CONCLUSION

Private Mail Bag, Suva. Telephone: 330 7811. Fax: 330 7611. Website: www.myfnpf.com.fj All correspondence to be addressed to the General Manager & Chief Executive.
 CONCLUSION

1. FNPF Reform is no longer an option!

It has to be undertaken NOW!

2. It is a CHALLENGE that has to be met

head on.

3. The onus is on US! To do the right thing.

4. We look forward to your frank, honest

and positive contribution to the
symposium.

Private Mail Bag, Suva. Telephone: 330 7811. Fax: 330 7611. Website: www.myfnpf.com.fj All correspondence to be addressed to the General Manager & Chief Executive.
 THANK YOU

Private Mail Bag, Suva. Telephone: 330 7811. Fax: 330 7611. Website: www.myfnpf.com.fj All correspondence to be addressed to the General Manager & Chief Executive.