A new performance audit report is warning that the Government’s public-service pension system has accumulated over EC $200 million in pension-related liabilities.
The report, titled The Government’s Pensions, was presented to the Legislative Assembly on June 30, 2026, and examined the operations of the Pensions Unit within the Office of the Deputy Governor.
The Auditor-General found that while government reports annual pension and gratuity payments ranging between EC$10 million and EC$16 million, the actual long-term obligation to current and future pensioners is estimated at more than EC$200 million.
The report noted that these costs are not fully reflected in Government’s published financial statements, which continue to operate on a cash-basis accounting system described as outdated and inadequate for capturing the true financial obligation.
As this is the present-value estimate (discounted at 5% per year), the report noted that the gross amount of future pension-benefits to current pensioners is a far greater figure which means new pensioners, at higher average salaries and allowances, will continue to add to the Government’s total liabilities for these future pension-related obligations.
“We have identified several deficiencies in operations and a large backlog of pension account reconciliations with and reimbursements to other countries over the past 30 years. We found that government’s pensions are non-contributory. The main factor leading to high recurring costs to the public finances is that the past and present employees who will receive 100% of the pension benefits make no contributions,” Ms. Meade reported.
She explains that the government as the employer also makes no periodic contributions towards funding of future benefits. It pays 100% of the current pensions as they are disbursed. This arrangement contrasts sharply with the Social Security Fund which operates on a contributory model both for employees and employers, including the Government of Montserrat Public Employees.
Ms. Meade noted that a recent decision by cabinet is to “transition to a defined contribution plan. Another approval recently by cabinet is to transfer the government’s pension to the administration of the Social Security Fund in late 2025. This should have taken effect during this fiscal year; however, discussions are still ongoing and implementation is deferred.”
She stated that “the audit found that legislators’ pensions are the most generous category. Members of the Legislative Assembly become eligible for a special category of pension benefit after just six years of service as per the Service Act. Generally, we observe that across the types of public pensions, the legislator’s ratio of pension benefit to salary is the highest of all categories of pensions, having regard to the minimum of years of service required.”
The report called for the introduction of employee contributions towards government pensions as the most important step towards long-term sustainability.
It suggested that such contributions be introduced gradually, similar to previous reforms undertaken by the Social Security Fund between 2022 and 2026, to reduce the impact on employees.
The report also recommended that pension contributions be considered for tax deductions, similar to existing deductions available for Social Security contributions.
The Auditor-General further recommended improvements to pension budgeting, noting that government should use more accurate forecasting methods to account for increasing numbers of pensioners and periodic pension increases.