Senator suggests tax ease for pensioners

An Independent Senator has called for some tax allowances to be restored and for the Government to stop taxing pensions.

Senator Crystal Drakes has also questioned whether any consideration will be given to increasing the age at which a Member of Parliament gets a pension, from 50, with Barbadians facing an increase in the pensionable age from 67 to 68.

Contributing to debate in the Upper House on the National Insurance and Social Security (Amendment) Bill and the Pensions (Miscellaneous Provisions) Bill 2023 on Wednesday, she said the “double taxation” of senior citizens must stop.

“If we’re saying to persons, ‘plan for your retirement and make the necessary steps and adjustments in your financial planning’, I do believe that some tax allowance should be reinstated to encourage that participation . . . . You work, you are taxed. You put aside your money for your old age pension, private or otherwise, and you are taxed,” she lamented as she “I don’t know the numbers, but I would really like to know how much revenue the Government really gets from the taxation of pensions because if it is immaterial, it is a measure that can be scrapped.”

She also strongly defended the continued payment of non-contributory pensions, explaining that these were not paid out of National Insurance Scheme (NIS) funds but from the Consolidated Fund.

Drakes insisted these payments must continue as a means of protecting the most vulnerable in society.

“For the life of me, Mr President, growing up in a society where there were persons who were on sugar plantations, fishermen, people who were barely literate who sent school people like my parents, you then look at them because they did not have the foresight to put down for their retirement because they did not come from an age where they had to do that because they worked, they died, to say to a reform committee or have the opinion to stop having non-contributory pension in Barbados; what society are we living in, Mr President? Where is the social justice? Where do we say ‘thank you’ to those persons in our society?” she asked.

Saying that in 2021, these pensions cost the Government roughly around $8 million, Drakes added: “They don’t affect the pension that is contributory. It is in no way affecting it. I do not understand the notion that you have some of the most vulnerable persons in your society and you’re saying to them that the little bit that they are getting they should not receive.”

Pointing out that personnel of the country’s armed forces who risked “life and limb” were allowed to retire at the age of 55, Senator Drakes further queried whether the Government would be revisiting the pensionable age of elected members of Parliament.

“Is there a point in the discussion where the Government, in instituting measures for others, also gives a little and looks at the pensionable age of elected members of Parliament to say ‘many hands make light work’ and ‘we are all in this together’?”

Late last month, Minister of Labour, Social Security and the Third Sector Colin Jordan announced that the pensionable age will move from 67 to 67 ½ years in 2028, and then to 68 in 2034; and the number of contributions required to become eligible for pension will move from 500 weeks – approximately 10 years – to 750 weeks – about 15 years.

Meanwhile, the economist has expressed concern about the NIS’ high level of exposure.

Pointing to the $269 million shortfall in contribution income in 2021, she said investment income was necessary to correct this and other deficits, but not mainly in the local economy.

“Eighty per cent of the portfolio is located in the local market, 67 per cent is in government paper. The fund has about $4 billion in assets unaudited…. But, Mr President, even unaudited, you can see that there is a high exposure to the fund to what happens in the local economy. And any fund manager will tell you this portfolio’s exposure to the local market is too high. You have to diversify your portfolio,” Senator Drakes said.

She, therefore, commended the Government’s move to allocate US$40 million (BDS$80 million) to diversify the fund outside of the Barbados market.

On Tuesday, the NIS said the Central Bank of Barbados had given it permission to invest that amount in international markets on a phased basis.

“This will significantly enhance the Fund’s risk management and earnings capacity to the benefit of our entire social security system,” Deputy Chair of the NIS Rawdon Adams had said.

However, Drakes suggested that more must be done.

“I believe one of the first securities that is being taken up is US Treasury bills, Mr President. Sir, because of the demographic change, the fund has to complement contribution income with a diversified portfolio in investments to complement and supplement the contribution income to pay out the benefits that when people go in line and stand up to wait for their pension, they can get it. That is the cold hard facts. We cannot get away from it,” she said.

(JB)