Rising pensions bill a problem

To reduce the risk that the government will be forced to bail out the National Insurance and Social Security Service’s (NISS) pension fund, the administration is banking on the effectiveness of three actions: boosting the working-age population, adjusting contribution rates, and strengthening governance of the fund.

In the Government of Barbados’s 2025 Fiscal Risk Statement prepared by the Fiscal Risk Unit (FRU) in the Ministry of Finance, Economic Affairs and Investment, the administration said the report was part of its ongoing agenda of “identifying, assessing, prioritising, managing and monitoring fiscal risks to ensure the sustainability of public finances”.

While the report addressed risks such as geopolitical factors, institutional, environmental, and macro-economic risks, the FRU also drew attention to social and long-term risks which included the island’s quickly ageing population, low birth rate, increasing costs to support healthcare, and the current social welfare programmes, which the unit described as “unsustainable”.

Addressing the impact of the island’s ageing population and the long-term fiscal implications, the ministry document acknowledged Barbados was “experiencing significant demographic changes” which posed major fiscal challenges.

These included a dwindling workforce and concurrent revenue decline, as well as a smaller working-age population that would be supporting an increasing ageing population.

To reduce the impact on the NISSS, the government said several steps were being taken to ensure the State does not have to shore up the pensions fund which the 17th Actuarial Review showed the NISSS liabilities exceeded its assets.

However, the administration was confident that introducing policies to increase the working age population, adjusting the NISSS contribution rates, and tightening governance and management of the fund, will stave off the necessity to pump money into the social security system to support rising pension demands.

According to the statement, the government is concerned about the high death rates from non-communicable diseases, which currently account for eight out of every 10 deaths on the island. This, said the policy advisors, has “significant implications” for population dynamics and pension schemes.

The report noted that a life expectancy on the island of around 79.92 years at 2025, and a GDP per capita income of $22 673 at 2023, suggested overall health and wellbeing of Barbadians, as well as a “high standard of living”.

However, it warned: “Concurrently, population dynamics, such as a low population growth rate and an aging population, challenge the sustainability of social welfare programmes and labour market productivity. Pension schemes face fiscal pressures due to the increasing number of retirees relative to the working-age population, necessitating reforms to ensure long-term financial stability. These factors collectively require strategic planning and policy adjustments to mitigate their impact on government resources and societal stability. This is an area of concern that requires policymakers’ continual attention and commitment to resolution.” (IMC11)