Crowds waiting for FNPF funds. SOURCE: provided.
The Asian Development Bank says the FNPF has "vast funds" at its disposal through its legal monopoly over compulsory long-term savings, with the Fund holding about one third of the country's gross assets and being a key financier of government debt.
The Fund's investments overseas are subject to approval from the Reserve Bank of Fiji, which takes account of the prevailing foreign reserve outlook.
The ADB says the Fund's investment portfolio comprises between 70 to 75 per cent in government securities.
"Funds that are not in the form of government bonds are channeled into domestic tourism and real estate projects,” the group says. “The FNPF is also an active buyer of government assets divested through privatisation."
But this emphasis on local investments in tourism-related projects on can cause problems or require the Fund to support national economic priorities.
In years past, the FNPF had troubles with a resort/real estate project at Natadola, which has been written down by almost $F82 million.
The project was later re-started and housing blocks now on sale, allowing it to claw back some of the write-downs.
Koroi says the FNPF has historically taken a conservative approach on investment, but is looking to build up its offshore investment from about 11 per cent now to between 20 to 25 per cent.
"The majority of our assets are still tied with government bonds and interest-type securities,” he says.
“For funds like us to be able to make the returns that members expect, we need we need to take on a bit more risk. But our investment universe in Fiji is very limited."
"There are very limited choices that can suit our long term investments and also give good returns and protect our members. If we want to invest offshore, we have to get approval from the Reserve Bank."
However, Koroi says the Fund will also focus on its social security role through the payment of annuities, health and medical benefits, and retirement homes.
The Fund, which is celebrating its 50th anniversary, introduced a new scheme in 2012 after having what the Prime Minister describes as a "wake-up call".
Previously, members were able to access 25 per cent of their balance as annual payments while being able to use 22 grounds for withdraw up to two thirds of their balance before age 55, for everything from weddings to housing.
A new actuarial-based pension scheme was introduced and members on the old annual payments arrangements were allowed to take out their money in full or join the new scheme.
The grounds for withdrawals were cut to about five (while allowing for national emergencies like TC Winston after board approval).
Koroi says without such dramatic changes, the Fund would have run out of reserves by 2026 and by 2056 would have been relying on cash flow.
"There was a major outcry from the public,” he says. “We're fortunate we able to proceed in 2012 … I think people understand why it needed to be done."
"Obviously, everybody in Fiji has got a stake in the business, so everybody will have a view on what we do."
Koroi says the old rules on withdrawals contributed to the problem. Members were reaching 55 years with low account balances, with about 40 per cent of working Fijians who retire over the next five years having balances lower than $F10,000.
Now, 70 per cent of their balance is preserved until retirement.
"Before, members could access up to two third of their balances," he says. "People were looking at this as working capital or their overdraft facility, which is really the wrong mindset."
"We want 80 per cent of our members at least to reach retirement with $60,000 to $70,000 in the next 10 to 15 years."
The issue of funding decent retirement is an issue for all countries, including Australia and New Zealand. But Fiji and other Pacific nations face the added challenge of bringing more citizens into the formal economy, with an estimated 35 per cent of Fijians not having a bank account or using informal services.
The big issue is how Fiji can increase employment and wages, as the number of job seekers joining the labour market every year outweighs the number of new jobs.
There are problems with informal work and under-employment, and with university-educated job seekers struggling to find work, while there is a shortage of workers with trades and technical training.
Meanwhile, there is the cultural custom of kerekere, borrowing from kinfolk without an obligation to repay the loan. This works both ways, in a family member can expect to receive support as will give it. But it can work against individual savings.
As things stand, remittances sent home by Fijians working abroad are worth almost $F500 million a year, which includes members of the military on UN peacekeeping missions, as well as private citizens employed in Australia, New Zealand and elsewhere.
The good news is the Fijian government's financial inclusion taskforce, chaired by Reserve Bank Governor Barry Whiteside, is making steady progress and providing a model for many developing nations to follow.