Efforts to calm Barbadians’ fears about the National Insurance Scheme (NIS) have not been too convincing, when one breaks down the financial troubles facing the 55-year-old social security scheme.
Ordinary citizens who have been working and diligently paying their NIS contributions over their working life and are expecting reasonable benefits from those contributions in another ten to 15 years, can see nothing but crisis before them.
There may not be a “house on fire” crisis in the well-appointed and maintained headquarters of the NIS at Culloden Road, St Michael, but there is a crisis of confidence and deep fear about the future.
Actuaries are certainly not “a dime a dozen”, they are in a very exclusive club of professionals, whose expertise is highly sought after by sovereigns and corporates. And so, if the NIS consultant actuary warns us that the coffers of the NIS could be empty in another 12 years on its current trajectory – that spells trouble.
Mr Derek Osborne has worked for social security schemes across the region. His most recent review of the NIS is not the first time he has drawn to our attention the dangers ahead.
When Mr Osborne alerted us to the fact that our $4 billion social security scheme was so in need of operational cash that it was calling in some of the fixed deposits it has in commercial banks before their maturity dates, that is an ominous sign.
He put it this way: “What we saw in 2020 and 2021 is that investment income, all of it, was needed to help pay benefits. All the assets – the savings we have accumulated over the last 55 years are now being tapped into and being used to help pay benefits.”
If this is not a crisis situation, it certainly comes very close.
The latest Actuarial Review should give us pause to reconsider whether our NIS programme of benefits and pensions will be around for the enjoyment of those who began their working life and contributions from the 1980s and 1990s. These are people who are on the verge of retirement or who are expecting to retire over the next decade.
The NIS has been implementing adjustments over the years. Those actions usually centred around increasing the contribution rates or raising the minimum insurable earnings levels which effectively has the same effect – higher NIS deductions from workers’ salaries.
Then there was the decision taken in 2004 to move the pensionable age from 65 to 67. While that action provided some wiggle room for the NIS, it created a period of uncertainty and some measure of hardship for people in the private sector who are forced to retire at age 65.
Retirees who chose to take their contributory pensions at age 65 receive a smaller pension than if they waited until age 67. And those who try to survive on their savings until age 67 to benefit from a higher pension, contend that those two years can be extremely challenging.
The fact too that pensions cannot keep pace with the high inflation, means that what pensioners are currently receiving cannot meet their needs. Hardship, therefore, increases among the fixed income elderly population.
When the NIS has problems -Barbadians experience even bigger problems because over the years we have invested in this programme and assumed it was being managed in a way that ensured its longevity and financial strength.
It is going to take a concerted and collaborative effort over the next few years to pull the NIS back from the brink so that it is around for more than another 55 years.
As Michael Howard, economist and Professor Emeritus of the University of the West Indies, Cave Hill Campus pointed out, and with which we concur: “I have heard talk before about carrying up the age of retirement from 67 to 70 years old, but that has its implications because the majority of persons do not want to be working at those ages.
“If [we] go that route, we could be looking at slower attrition, an ageing workforce and low morale, which is sure to have an impact on productivity and increasing contributions was simply piling on more hardship on an already overburdened workforce.”