The National Insurance Scheme (NIS) could face serious financial problems and challenges to meet pension payments by the year 2067 – or even earlier – if the current trend of an ageing population continues, Minister of Social Security Dr Esther Byer-Suckoo Friday revealed.
The minister made the disclosure to Barbados TODAY even as she sought to ease the fears of senior citizens who are worried that their pensions are being placed in jeopardy by the NIS’ continued funding of Government programmes.
“The fact that Barbados is an ageing population, our retirees and pensioners will live longer and at the other end the younger persons who would be earning and contributing there are less. At this point it is not a concern, but if the trend continues we could see that in another 50 years, or maybe even less, there would be a challenge in the balance in persons contributing and persons receiving benefits, mainly the pension benefits,” Byer-Suckoo said.
The Barbados Association of Retired Persons (BARP) said it was “very much concerned” about the stability of the NIS and the safety of pensions, and it was keeping a close eye on the scheme.
Its fears are driven by the NIS’ financing of the Freundel Stuart administration’s social programmes.
The scheme last year contributed $123 million to Government’s financing needs, according to the Central Bank of Barbados report for 2016.
BARP President Ed Bushell told Barbados TODAY he took some comfort from the minister’s assurance that the NIS was stable and there was no need for worry.
However, it appeared he was not entirely convinced, neither were his members who continue to be worried.
“Pensioners are very much concerned. But we listen to the Government authorities who say that, ‘don’t worry about it’, and that they are fully funded. And we rely on them to some extent, but we are concerned,” Bushell stressed.
“We feel that the NIS funds are there for a specific purpose and they should not be used to fund Government’s day-to-day activities,” he stated, adding that the organization, which champions the well-being of Barbadians aged 50 or over, had previously raised its concerns about the stability of the NIS to Government.
“We are watching it very, very carefully. You have to remember when you are 20 you have a chance to recover if you have a financial loss. If you are 60 or 70 your chance of recovery is very much diminished. So if you lose funds at age 70, you are not working, you are on a fixed pension, unless you get some investment opportunity you are not going to recover. So we got to watch that very, very carefully,” Bushell said.
However, Byer-Suckoo told Barbados TODAY while she understood the pensioners’ concern, and even though the level of funding provided to the administration by the NIS was not ideal, Government had never defaulted on its payments.
“The investment in Government has not proven to be unsatisfactory. Government has paid its debt. It lends to Government at a very high rate so the rate of returns turns out to be more than if we were investing overseas.
“So while on paper it is not the ideal circumstances, we have extenuating circumstances and Government does need to borrow, and it is safer for Government to perhaps borrow from the National Insurance and the National Insurance ensures that the interest rate and the rates of return it gets from Government is actually high,” the minister explained, emphasizing that the scheme, which will celebrate 50 years this year, was not in danger of running out of funds any time soon.
The 15th actuarial review of the NIS is almost completed and will be released soon, when more details on its financial state will be made available and discussed.
Byer-Suckoo said the NIS continued “to serve the purpose for which it was designed and it continues to be managed well”.
BARP, which boasts membership of approximately 40,000, has reported a drop in the number of new members this year.
The non-profit organization currently welcomes about 175 new members monthly, down from 270 previously, according to Bushell.
“We are investigating what is the reason for that, but we realized that the number of people who are becoming 50 might be lessening. So we are trying to get the statistics to see if that is the major cause
of the reduction in the new members,” Bushell said.