The Government of the Virgin Islands is taking decisive steps to transition from the current non-contributory Defined Benefit Pension Plan to a Contributory Pension Scheme, given the unsustainability of the present system, and the escalating financial burden on the state. Photo: jupiter.money.com

Premier and Minister of Finance Dr the Honourable Natalio D Wheatley (R7), addressing the House of Assembly on February 13, 2025, conceded the urgency of pension reform, revealing that pension expenditure has surged significantly in recent years. Photo: YouTube

Premier and Minister of Finance Dr the Honourable Natalio D Wheatley (R7), addressing the House of Assembly on February 13, 2025, conceded the urgency of pension reform, revealing that pension expenditure has surged significantly in recent years.

“The most recent actuarial study conducted in 2009 by Pricewaterhouse and Coopers (PwC) reported an unfunded liability of $201.2 million. Since then, pension expenditures have increased significantly, with the 2023 pension outlay amounting to $27 million. In 2024, pension and gratuity payments totalled $29.6 million.”

According to the Premier, the 2025 budget anticipates a further 10.3 percent increase in pension payments, bringing the total to $32.7 million, reiterating,“...this is not sustainable.”

Phased implementation

According to the Premier, the government has embarked on a structured approach to implement the new Contributory Pension Scheme, with a Pension Reform Steering Committee, co-chaired by the Deputy Governor and the Financial Secretary, established in September 2023 to guide the transition.

Premier Wheatley also detailed various measures being undertaken, including stakeholder engagement, legislative and policy reviews, actuarial assessment and technical assistance and benchmarking, among other areas of focus.

The government, he said, had already sought technical assistance from the Government of the Turks and Caicos Islands, which successfully transitioned to a Contributory Scheme in 2022 and 2023.

With this in mind, he disclosed that the administration is working diligently towards implementing these changes, with a detailed plan already advanced to the Cabinet on February 12, 2025.

“Given the complexities involved, the Government aims to finalise the framework for the Contributory Pension Scheme by the end of 2025; Subject to stakeholder consultations and legislative amendments, phased implementation is expected to commence in 2026, with full transition targeted for completion within a medium-term timeframe.”

The transition to a Contributory Scheme is expected to yield significant long-term savings by reducing the government’s pension liability, and according to Premier Wheatley, preliminary estimates suggest that annual pension expenditures could be reduced by at least 20 percent over the next decade, however, precise figures will be determined following the completion of the actuarial study.