Not just NIS

Barbadians are being encouraged to invest in private pensions and not solely depend on the National Insurance Scheme (NIS) to support them in their retirement years.

The advice has come from president of the General Insurance Association of Barbados (GIAB) Randy Graham, who contends that the NIS can no longer afford to support pensions for every Barbadian.

His advice follows the recent revelation that the National Insurance Fund was in danger of being depleted within the next 12 to 20 years if urgent action was not taken.

Some of the solutions put on the table to address this state of affairs include: increasing the retirement age, decreasing pensions paid by the NIS, and increasing worker contributions.

However, in an interview with Barbados TODAY, Graham, said regardless of what decision was made to solidify the NIS, private pensions would be necessary.

“It is a difficult conversation for the country to have now. The reality is that what the Government has to pay out to pensioners now is growing faster than the working population can contribute. So the conversation about whether we get existing workers to pay more into the Fund or we get new people to enter into the Fund is a difficult conversation to have, but we understand it is necessary to be able to fund the pensions and the NIS.

“I think what we will see happening is that, hopefully, there is a [realisation] that the pension from the NIS in itself can no longer support everybody’s retirement years, so I think it is time where we have to get the population to look towards a private pension to supplement the NIS,” Graham said.

He added: “Even if we solve the NIS problem we can’t expect the NIS pension to grow at the rate that it needs to grow at to have people with enough income to support the retirement years. So we need people to start taking more responsibility and to get their own private pensions to supplement the NIS, no matter the solution.”

The insurance executive lamented that only a small percentage of Barbadians have private pension plans.

He suggested that such plans needed to be made more appealing.

“What I can tell you is that the pension funds under investment for the private sector pensions are in the millions…. Two to three million dollars in funds are being invested for private pensions, so it is a significant amount of money being set aside for private pensions,” Graham noted.

“What I fear is that maybe that money is only there to support 20 per cent of the population that have actually bought private pensions. So, you could have a situation where there is 65 to 70 per cent of the population that has not brought private pensions, and that is where the issue is. We need to find a mechanism to make private pensions much easier and much more affordable for a wider part of the population to be able to enter into a private pension plan.”

Addressing the hesitancy which some persons have when it comes to private pension plans, given the collapse of CLICO which resulted in millions of dollars in investments being lost, Graham said it was understandable but assured that stricter regulations and governance are now in place.

“People should be hesitant and there should be a hesitancy that causes them to ask questions. They should ask questions about where their funds are being invested and they should be given easy-to-understand, transparent answers,” he said.

“We have now a lot of regulations and a lot of governance around the investment in pension funds and insurance funds that allow for proper governance and management of the funds. So, I think we’ve come a long way in the regulation and in the governance around funds to take confidence that the funds are being properly managed.”

randybennett@barbadostoday.bb