Government offers moratorium on NIS interest, announces pension reform plans

Government will give businesses and individuals who owe the National Insurance Scheme (NIS) three months to pay their arrears interest-free.
Prime Minister Mia Mottley made the announcement of the April 1 to June 30 moratorium as she also shared plans for pension reform that include making the NIS more independent.

Mottley said there was a need to rebuild the national pension system, which took a hit when national debt was restructured and again as a result of the COVID-19 pandemic.

She said part of her administration’s comprehensive plan towards pension reform would be to make the NIS a statutory corporation and more independent from Government in its operation by the end of 2022; recapitalise the NIS; require the NIS to diversify its investments at home and abroad; and ensure that where private projects seek public support, they give the NIS the choice to invest.

“That is our side of the bargain. But the other side is that we need people to contribute,” she said, as she addressed the debt owed to the NIS.

Acknowledging that COVID has significantly impacted business over the past two years, she urged employers, now that the country has reopened, to pay any outstanding contributions for employers with the NIS and offered her administration’s assistance in doing so.

“There will be a moratorium on interest of any outstanding contributions to the NIS, effective April 1, 2022 to June 30, 2022, once you settle your principle contributions within a two-year period,” Mottley said, noting that businesses and self-employed persons entering payment arrangements with the NIS will have until March 31, 2024 to settle the outstanding arrears in order to qualify for the waiver.

“If you don’t stick to the plan, know the original debts become owing again. . . . The earlier businesses and self-employed persons enter into these arrangements, the better for you. If you don’t settle a payment plan during the period of the amnesty, well, you will be required to pay all your interest and you may well be the subject of enforcement,” she warned.

Mottley urged Barbadians generally to “get straight” with the NIS.

“COVID should have taught everyone the importance of the NIS. It is one of the cornerstones of our economic system and I do not know of any other system in our region that paid out the equivalent of $150 million in the last 12 months. I take this opportunity . . . to encourage all Barbadians . . . . Get yourself straight, I beg you, please, with the NIS, because you’re not doing it for us, you’re doing it for yourself. It is a lifeline,” she said.

To employees specifically, Mottley urged: “Do not take it for granted that your employer will take care of your retirement planning. You too, have a responsibility to check your account, which is now easily accessible online.”

The Prime Minister also spoke specifically about pension arrangements for those working for the Government, the country’s largest employer.

She noted that on assuming office in May 2018, her administration found approximately $250 million in unpaid NIS contributions for public servants for the 2015-2018 period, but had been able to pay that off and keep current.

However, she disclosed, there was still a need to reform the public sector pensions system, noting that some statutory bodies have “chronically underfunded” pension funds.

“In the coming months, the Ministry of Finance will develop a plan of action to address the funding deficit to be reported to Parliament by mid-year review in October 2022,” Mottley said, adding that the NIS will administer all pensions arranged for the public sector by January 1, 2024.

“We will also amend the pension regulations to allow for the application of automatic abatement for public officers on early retirement. Existing public officers whose salary is above the insurance earnings ceiling [$1,182 per week and $5,120 per month effective January 1, 2023] will be exempt from making contributions to their pensions as their terms and conditions of service remain the same.

“However, officers from below the earning ceiling who are promoted to or acting in posts for more than one month above the insurable earnings ceiling, or an officer who enters the service above the ceiling will be required to make pension contributions,”Mottley told Parliament.

Addressing the perennial issue of people acting in posts for extended periods of time and then reverting to their substantive posts, causing anxiety, particularly with the calculation of pension benefits, the Prime Minister said there is a proposal to calculate pension on the basis of the best five years’ salary.

“This would apply to all public officers who are making contributions to their pension irrespective of whether you are above or below the earnings ceiling.

For all new employees to the public service, the maximum pension will be attained after 40 years of service instead of 33 ⅓ years, with contribution levels of between two per cent and three per cent below the NIS ceiling and five to eight per cent above,” she added.

Mottley said the Government will launch an education programme for all public officers and the public at large with a view to improving their financial knowledge in this regard and ultimately to encourage all public officers to make voluntary contributions as appropriate to augment their pension in retirement.

The Prime Minister said she believed the plans formed “a fair and responsible way of putting a good and attractive public pension scheme on a strong and sustainable path”.

“The current path is not sustainable and we have a duty to protect those in it. But even while we are doing this, we need to nurture a culture where we commit to planning and taking greater responsibility for our future. Personal responsibility matters. Bajans must come to grips with planning for their retirement even beyond what is available through NIS and Government,” she said. (DP)