With the National Insurance Scheme’s (NIS) Unemployment Fund now in danger of being wiped out over the next two to 10 years, a recommendation is now scheduled to go before Cabinet with a view to safeguarding the entitlements of thousands of jobless Barbadians.
This is based on the findings recently-published in the 14th Actuarial Review, which looked at the years 2009 to 2011, with actual experience in 2012 and most of 2013.
It shows that the Fund paid out “significantly more than combined contribution and investment income, resulting in total reserves declining from $127.8 million to $85.4 million between year-ends 2008 and 2011.”
Based on short-term projections of the Unemployment Fund, the report also indicates that “reserves could be depleted as soon as 2016 if the contribution rate remains at 1.5 per cent”.
“Even under a scenario of increasing contribution income and declining benefit costs, the Fund will be depleted by 2023,” the report warns.
On the other hand, the Severance Fund has excess reserves. These grew from $112.6 million to $152 million over the same period, and are expected to continue to grow with the current 0.5 per cent contribution rate and benefit provisions, states the 96-page document.
The report also includes a number of recommendations to protect the Unemployment and Severance Funds. Among them, a suggestion that the contribution rate of the Unemployment Fund be increased by 0.5 per cent to two per cent, or inject $50 million into the Unemployment Fund.
“Such an injection could be a transfer from the Severance Fund, if legally possible,” the report adds.
It also recommends that the 0.5 per cent to the Severance Payment Fund be temporarily suspended and a comprehensive review of the provisions of the Severance Payments Act be carried out to determine what amendments were required to create a scheme “that better meets the needs of both employers and workers when redundancy either occurs or is being considered.”
However, when contacted today, chairman of the NIS Board Dr Justin Robinson confirmed that the situation facing the Fund was serious given the Government’s ongoing retrenchment programme and the average rate of unemployment which has been put by the Central Bank at 11.7 per cent for the four quarters ending March 2014.
Dr Robinson said the Board has already been advised that it would not be legally possible to transfer the required funds from the Severance Fund to the Unemployment Fund, as recommended by the actuaries.
Therefore, he said another recommendation had been made by the Board to the Minister of Labour Dr Esther Byer-Suckoo to suspend the employer’s contribution to the Severance Fund for a period of one to two years and to inject the monies directly into the Unemployment Fund as a means of safeguarding the jobless benefits scheme in the short term.
That decision is subject to Cabinet approval.