The attempt by government to sell its planned reform of the country’s social security scheme lacks one major element, a mechanism or plan that charts a course to encourage Barbadians to invest in their own retirement plans.
The National Insurance Scheme’s (NIS) very popular tagline “We are your lifeline” has been effectively sold to the population. As a result, this narrative that the scheme operated by government was always going to be in a position to support most of the retirement needs of the population has been internalised.
The fact that private pension schemes’ calculations are tied to the expected amount a person will receive from the NIS is an indication of how interwoven the national pension and social security arrangement is in our daily lives.
Following the last actuarial review that triggered panic among many Barbadians that the NIS scheme was facing the possibility of bankruptcy if no action was taken, we were warned changes were imminent.
Actuary Mr Derek Osborne indicated that our $4 billion social security scheme desperately needed operational cash and had been calling in some of its fixed deposits at commercial banks long before their maturity date.
That itself was an ominous red flag.
Even more stark were these comments: “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.”
There is no doubt that our aging population, the significant fall in the number of employed persons contributing to NIS, the restrictions on what investments the NIS can make, and the use of NIS money to support government financing over the years, have all contributed to the current challenges.
The decision by the current administration to push ahead with reforms of the scheme has not gone down well with some groups despite the general acceptance that action needs to be taken.
The Pensions (Miscellaneous Provisions) Bill and the National Insurance And Social Security (Amendment) Bill, were laid in Parliament last week. They were set to be debated in the Upper House yesterday, but that process was delayed until next Wednesday.
Mr Caswell Franklyn, the former opposition senator, head of the Unity Workers Union (UWU), and perennial thorn in the side of the ruling administration, has made it known that he will not be silent in his disapproval of plans to increase the age of retirement to 68 and incrementally raise to age 63, the starting point to access early retirement from the NIS.
The planned reforms include an additional 200 more contributions to the present qualifying amount in order to receive a contributory pension.
Very few people want to work until age 68 and so we are not surprised that people are grumbling about the changes.
According to Mr Franklyn, the government was using the cover of distraction and merriment of the Crop Over Festival to institute the changes.
“They haven’t consulted the people. They put it through before the House [of Assembly] on Friday, which is abnormal, and to tell the truth, why would you rush something through the House in just one day when you aren’t ready to deal with the matter yet?” Franklyn asked.
“This is not an emergency . . . They are trying to push that through when everybody will be jumping up for Crop Over – when people are distracted – and then we won’t get a chance to see what is happening.”
What this entire process has revealed is the absence of guarantees when it comes to our retirement income. It has become even more critical that individuals begin taking a long-term approach to financial planning for retirement.
