APS takes measures to secure sustainability of pension fund

APS Director Nadya Croes-Van Putten


Impact of COVID-19 causes decreased actuarial interest rate 

Cayhill, Sint Maarten — Algemeen Pensioenfonds Sint Maarten (APS) has taken additional measures to secure the sustainability of the pension fund. These measures include the lowering of the pension fund’s actuarial interest rate from 3.75% to 3.5% and lowering the accrual percentage for participants from 2% to 1.75%. The COVID-19 pandemic has had an extensive adverse effect on the international economy, significantly lowering interest rates worldwide. Consequently, like many other pension and insurance funds, APS must adjust its rates to curtail the effects. These changes went into effect as of January 1, 2021.

APS will be informing participants and stakeholders with further details about the implications of these measures by post, email, and social media. In addition, a webinar will be scheduled, giving participants the opportunity to ask APS representatives their questions about these changes. Webinar dates and other updates will soon be announced via www.apsxm.org, APS’ Facebook page, and the APS digital newsletter. Persons interested to receive the APS email newsletter can sign up on: bit.ly/apsxm-news.

Actuarial interest rate
Research findings of the Asset Liability Management (ALM) study performed by Ortec Finance prompted APS to lower its actuarial interest rate from 3.75% to 3.5%. The actuarial interest rate is used by APS to determine the pension benefit obligation – the funds required to pay out pensions now and in the future. This rate is established annually by the pension fund’s certified actuary. The calculation is based on the local and international market interest rates, which since the pandemic, have seen significant drops.

No change in participant premium contribution
In addition to the lowering of the actuarial interest rate, APS was required to update the mortality table, due to the increase of the life expectancy. Mortality tables are used by insurance companies and pension funds to predict the likelihood of a person’s passing. Both the lowering of the actuarial interest rate and update of the mortality table have had an impact on the premium percentage contribution of participants. However, no change will be made in the premium contribution percentage; this will remain a total of 18% of the salary. The employee’s contribution remains 8% of the salary-franchise and the employer contributes the difference up to 18% of the salary.

Accrual percentage for participants
Even though APS realized successful returns on investments, an effective pension reform in 2020 and a coverage ratio of 101.93% by the end of December 2020, in the present situation, lowering the accrual percentage of participants is required by law. The accrual percentage for participants has been lowered from 2% to 1.75% as of January 1, 2021. The national pension funds of Aruba and Curacao adopted the 1.75% accrual measure in respectively 2015 and 2013. For the BES islands the accrual percentage has recently been set to 1.71%.

“Due to the COVID-19 pandemic, pension funds all over the world have been affected by the decrease in local and international market interest rates. It is therefore not a surprise that at some point we would also have to bear this setback. Fortunately, APS is able to cushion the effects of the decrease in the local and international market interest rate thanks to the successful returns on investments and the implementation of an effective pension reform in 2020. As of July 2021, we are at a draft coverage ratio of 107%. Because of these results and measures, APS expects a relatively swift recovery from this international financial setback”, APS Director Nadya Croes-van Putten commented.