Link: Pacific Islands Report
Pacific Islands Development Program, East-West Center

With Support From Center for Pacific Islands Studies, University of Hawai‘i

RMI Retirement Fund Faces Bankruptcy Within 8 Years
Government told to raise taxes, reduce benefits for fund’s survival

By Giff Johnson

SAIPAN, CNMI (Marianas Variety, Nov. 21, 2012) – The Marshall Islands has been warned by an investment manager that its retirement fund will be bankrupt in eight years unless action is taken now to fix the problems in the system.

"Social Security is in crisis," said Frank Armstrong, who heads Investor Solutions, the Florida-based firm that has managed Marshall Islands Social Security Administration investments since 2003. "The current forecast is that there will be no fund in less than eight years."

Among other actions Armstrong said the Marshall Islands government needs to take is to raise taxes, increase the retirement age, and reduce benefits to ensure survival of the fund beyond the next eight years.

He said that measures proposed sound harsh, but it will be worse if action is not taken.

Under Investor Solutions management, the fund has grown from $23.7 million in 2003 to $57.9 million. In 2011, with the stock market down, Marshall Islands retirement fund investments lost $1.1 million. But they rebounded this year, generating the highest 12-month return of over $7.2 million through September this year.

But with the Social Security agency needing to withdraw $5 million in investment money this year to cover regular benefit payments to retirees, the fund is not in a sustainable position, Armstrong said.

He complimented the Social Security board of directors for its management and said it has been raising the issue to the government for several years, but has not been able to get any action.

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