Economist urges Gov’t to consider impact of raising age to get pension
By Jenique Belgrave
A senior economic consultant believes the Government should increase National Insurance Scheme (NIS) contribution rates instead of raising the pensionable age to 68.
In addition, Canadian-based senior Barbadian economist Carlos Forte contended that there must be a commitment by the Government to pay back the $1.3 billion debt owed to the NIS that had been written off during the administration’s 2018 debt restructuring programme.
Calling the proposed age increase for persons to be eligible for pension “unduly onerous”, he said the Government should consider its impact on the working population.
Minister of Labour Colin Jordan announced late last month that the age will move from 67 years to 67 ½ years in 2028 and then to 68 in 2034, and that the number of NIS contributions needed to get a full pension will also rise, from 500 to 750.
“I, personally and professionally, would have preferred not to raise the age of retirement…. I would have rather increased the contribution rate. The reason why I do have some reticence about increasing the retirement age is that 67 is already a pretty high age for people to have to wait to retire. Not everyone works in office jobs and may be proficient in terms of being in good health and sound mind at that age,” Forte told Barbados TODAY.
“The fact of the matter is that when considering policy options, you do have to take cognisance of the human side of things. We’re not just manipulating numbers to come up with a particular end result or solution based on a formula, but what is your real impact on people?
“I do think that increasing the retirement age would be unduly onerous in terms of the actual well-being of individuals and the quality of life, and it could actually be somewhat discouraging as well in terms of people having confidence in contributing to the Fund and whether or not they live long enough to even get a pension or to get a pension for a reasonable period of time,” he added.
The economist acknowledged that no matter what option the Government chooses to reform the NIS and prevent the NIS Fund from depletion, there would be “some pain”.
He was adamant, however, that to ease the pressure, the Mia Mottley-led administration had to pay back the money owed to the Scheme.
“My preference would have been that the Government would have committed to repaying the $1.3 billion that it wrote off during the debt restructuring, which has exacerbated the problem.
“So yes, you can say demographic issues and economic growth and employment, in particular, are major contributing factors, but by reducing the NIS asset base by $1.3 billion, what the Government has told us is a crisis could come home to roost within the next 10 years. It could have been the next 15 or the next 20. So that particular action of the Government was certainly not without consequences, and the Government was warned of that by former Prime Minister Owen Arthur and other economists like myself who would have been concerned about a debt restructuring that resulted in the NIS losing such a significant portion of funds,” Forte said.
Admitting that paying back such a large amount would be difficult, Forte suggested that it could be done over a 30 to 40-year period.
Meanwhile, the economist commended the Government’s move to invest US$40 million (BDS$80 million) of NIS funds abroad and urged that this not be a “one-off”.
“The Board should be given the management expertise in fund management and risk management and permitted to invest far more liberally than they have been allowed abroad so that the Fund can be properly diversified and those risks can be spread over a wider range of instruments,” he said.
“Currently, the Fund, as the deputy chairman and others have indicated, is skewed significantly towards government paper and other government investments, which exposes the NIS to risks, such as what we saw with the debt restructuring.”
Saying that the Government’s decision to increase the pensionable age and the number of contributions for pension eligibility was enough to get the job done “somewhat”, Forte stated that the viability and sustainability of the NIS Fund would also require sustained economic growth in the island and a boost in the population through immigration, “which we have not seen anything concrete about as yet”.
“If those two things don’t happen, which addresses the demographic issue that the country has been facing certainly over the last decade, in particular between 2010 and 2020, then it is likely that additional reforms would have to be undertaken in order to ensure that the Fund remains viable and sustainable,” Forte asserted.
jeniquebelgrave@barbadostoday.bb
