NIS fund in trouble? Increase in retirement age recommended
The National Insurance System (NIS) fund will be depleted in the future if certain recommendations are not adopted.
The recommendations, which include increasing the contribution rates and the retirement age from 60 to 65 years were made in the 9th Actuarial Review of the National Insurance System.
Speaking at a Joint Select Committee on Finance and Legal Affairs into the National Insurance System today, National Insurance Board (NIB) Executive Director, Niala Persad-Poliah noted that the national insurance contributions were increased from 12 percent of insurable earnings to 13.2 percent of insurance earnings in 2016, in keeping with the recommendations of the 9th Actuarial Review.
The maximum insurance earnings covered was also increased from $12,000 to $13,600.
However, she noted that NIB continues to pay out more benefits than contributions received.
“The NIB right now serves approximately 200 thousand persons. In fact for the year ended 2017 our benefit recipients were 191,840 persons of which 158 thousand are long term beneficiaries which means that 82 percent of the vulnerable persons that we serve in this country are over the age of 60. We would have collected just about 4.6 billion in contribution income, but we have paid 4.7 billion for the year ended June 30, 2017.”
The NIB Executive Director also revealed that the beneficiaries band (over 60) is projected to grow, while the contributions band is expected to decline.
Persad-Poliah said NIB’s liabilities are also projected to grow.
“Our liabilities are projected to grow way into the future. The 9th Actuarial Review projected that if there is no reform, we must begin liquidating our assets in 2018/2019.”
Meanwhile, Deputy Permanent Secretary of the Finance Ministry, Jennifer Latchman also responded to questions about the ‘health’ of the National Insurance System.
She said, “The NIB has stated that the fund is in trouble.”
And, Tim Kimpton, Actuary, Managing Director of Bacon, Woodrow & De Souza Limited also weighed in on the situation facing the National Insurance Board.
He noted that the 9th Actuarial report suggested progressive increases in the contribution rate.
“The review went further than that, it pointed to the need for progressive increases in contributions. Ultimately, taking contribution rate to 22.8 percent...”
Kimpton added that the 9th Actuarial Report also noted that the NIB Fund will be depleted by 2029 if several recommendations are not adopted within a particular timeframe.
However, NIB Executive Manager of Policy, Planning and Actuarial Services Feeyad Khan said the NIB has not accepted all the recommendations of the 9th Actuarial Report.
“We do not believe that moving the contribution rate to 22.8 percent is something that a future generation would be willing to pay,” Khan added.
He said the NIB has made its own recommendations to Finance Ministry.
“One, we intend to raise the contribution rate to 15.6 percent. Two, we support the increase in retirement age over a period of time. Three, we believe that we need to freeze the minimum pension at $3000.”