Government’s debt restructuring in 2018 wiped out more than $1 billion in the National Insurance Scheme’s (NIS) assets, it was revealed Wednesday by the fund’s consultant actuary.
Derek Osborne, who recently completed the 17th Actuarial Review of the NIS, which was laid in Parliament on Tuesday night, said the NIS needs urgent reform given the number of challenges being confronted by the social security scheme.
“Government saw it necessary to reduce its debt obligations, and like other bond holders, the NIS lost some of its assets. In this case, just over $1 billion,” he disclosed.
“When Government decided to have a haircut on its bonds, the NIS lost $1billion. NIS assets were reduced by $1 billion but government’s obligations to NIS were also reduced by $1 billion,” he however noted.
“In so doing, future taxpayers were saved $1 billion and so debt restructuring looked as though it made NIS a lot weaker but that is not the case because the same group who would have been called upon to make higher contributions, would have been called upon to pay higher taxes. So, it is a net wash, for the most part, for Barbados.
“The debt restructuring only had a three-year effect on the year that the NIS Fund would have been threatened to be depleted, had debt restructuring not occurred.”
The actuary also highlighted the unprecedented impact of the COVID-19 pandemic on the NIS’ financial stability and outlook.
“COVID-19 affected labour and so contribution income was down, and the funds of the NIS were affected.
“The Unemployment Fund paid out over $150 million in the year-and-a-half of COVID. That fund is back on good footing. Money was borrowed from the NIS Fund to be repaid and government also recapitalised the fund over a period of three years,” he stated.
The actuary also expressed concern about the inability of the NIS to convince more self-employed persons to make NIS contributions.
“We know there is a growing group of self-employed private sector workers. We see them as vendors and from different walks of life. Some we don’t see because they are working from home on their laptops and providing services locally and internationally.
“We are only capturing one of every eight. The challenge for the [NIS] is also a challenge for [these workers] because the base is shrinking because they won’t have a pension when it is their turn to retire and stop earning from their jobs,” Osborne remarked.
