National Insurance Scheme – Taking the Bull by the Horn

Among the measures announced in the Budget Speech was an increase in the minimum pension payable by the NIS from $35,000 per month to $43,075, or 23.1%. That increase is higher than the inflation rate since the last increase, so there is real value in this increase. He also announced similar increases for survivors’ and invalidity pension which are less costly to the Scheme. As a measure to support the vulnerable, the Old Age Pension was increased by $3,000 to $33,000 per month. This is not an NIS issue but relevant in the overall pension benefits of the elderly.

These benefits are welcome even though they deserve some comment.

1. The minimum pension is usually linked to the national minimum wage which stands at $60,147 per month. It seems therefore that the increase in the minimum pension without an increase in the minimum wage provides for the non-worker over the worker.

2. Surprisingly, the Minister appears to have been badly advised in relation to the number of persons entitled to the Old Age Pension which he gave as 76,000 persons and costing $2.7 Billion. Based on the official census, that number is just around 40,000. One wonders therefore how the difference will be dealt with.

3. The Minister also announced a one-off grant for persons who have not met the minimum requirement of 750 contributions to qualify for an old age pension. Noting that many employers might have gone out of business and the consequent difficulties in ascertaining contributions, he suggested a one0off grant to bring some 3,800 matters to closure at a cost of $550 million.

The Minister did not indicate how his proposed solution differs from what currently exists under the law. Focus believes that there are options. For example, the Scheme has a bank of uncredited contributions which could be utilised to top up persons who have 700 contributions. For persons who have between 600 and 699 contributions, their eligibility for a pension should be prorated based on the minimum pension. This will have some financial implications for the Scheme, but it is unlikely to come anywhere close to the Minister's estimate.

In any case, there is in progress an actuarial valuation being undertaken by the Scheme’s Actuary. It would be good if various ideas and options are discussed with him with the request that he makes recommendations in accordance with Social Security principles and the policies of this Administration.

In the recent past, there were legitimate fears that the Scheme was about to go broke. Oil has changed all of that. There is a large body of expatriate employees in the oil sector paying contributions at the ceiling level but who are here for such short periods that they will never qualify for long term benefits, nor will they claim short term benefits. We understand that the Scheme is now in a surplus position, and that this will continue for the foreseeable future.

No doubt the Actuary will also be revisiting some of his earlier projections and recommendations on which successive administrations have sat without making decisions. It is time that major decisions be made, including increasing the minimum pension age. Across the world, changing demographics have necessitated such changes and Guyana should use these good times of the oil bonanza to place the Scheme on a safe and secure future.

As part of that reform, the governing legislation for the enforcement of the law against delinquent employers must be addressed. Focus regrets and laments the decision by the government to appeal what was considered one of the more enlightened and pro-worker decisions in the history of this Scheme. This could hardly be what President Ali meant when he boldly announced the Government's intention to resolve all backlog matters before the end of 2023.

The poor 74-year-old Mr. Sheriff Zainul and others like him will languish because of the fear of “opening the floodgates”. It is nothing more than a legal artifice to deprive them of their benefits and consign them to a state of poverty in their remaining years. And when they die, their claim will not be pursued. That may indeed be the subliminal wish of the NIS.