There is no single silver bullet to correct difficulties being experienced by the National Insurance Scheme (NIS), but all options are being placed on the table to guarantee the scheme’s survivability for future generations.
This promise comes from NIS consultant actuary Derek Osborne.
“There is no single silver bullet that will put NIS on a path to long term sustainability; it will take the combination of three main things – improved economic performance, modifications to NIS design focusing on several parameters, and possibly some changes in overall structure and operational improvements,” Osborne said.
“Fundamentally the NIS needs more contributors, which will occur if we have economic growth, increasing birth-rates, or attracting persons with skills to Barbados. Also increasing the amount of self-employed persons and informal sector workers is critical for the NIS and critical for Barbados.”
Osborne said it’s key that stakeholders and Barbadians at large work together over the coming weeks to outline changes to how the scheme operates going forward, given that the NIS continues to be an essential safety net for pensioners and workers of all ages who depend on NIS benefits.
Though no proposed changes are yet to be set in stone, the small contribution rate increases linked with economic growth may be required, with the organization currently eyeing a half or full percentage rise.
Osborne said suggestions currently on the cards include adjusting the pensionable age, as was done in the 2004 reform.
“Similar to the reforms that were made in 2004, the following adjustments to … will be considered. Firstly, increase the pensionable age that is now 67, anywhere between 68 and 72. However, any increase will be phased in, nothing immediate. For example over a 12-year period as was done when the age was increased from 65 to 67 after the 2004 reforms.
“Increase the first age at which Old Age pensions are payable anywhere from 62 to 65. Appropriate reduction factors will apply for pensions awarded prior to pensionable age,” he said.
Other proposed changes include making the maximum pension payable being 60 per cent and can be reached after 36 years, with the number of years required to reach 60 per cent increasing to 40 or 45 years of contributions, in addition to the maximum pension replacement rate reducing to 50 or 55 per cent.
One key area that could not be ignored, was the need for self-employed persons to be more consistent in their contributions. One such way outlined was to streamline and simplify the process for these workers.
“We really need to get more self-employed and informal sector workers paying from the current one in every eight to one in every two self-employed persons. Forms do not easily allow this and so we need to move to a flexible contribution payment system that does not require forms, does not require specific due dates, and does not require specific amounts,” Osborne said.
“Should self-employed persons be given a choice as to what benefits they wish to contribute towards … that also will be considered.”
The actuary also signalled a warning to employers who continue to have outstanding contributions due for their employees, make deductions from wages but do not pay them to the NIS and or do not deduct and do not contribute to the NIS. To assist in this regard, a closer working relationship with the Barbados Revenue Department is being undertaken. (SB)
