Whither the NIS?

Jamaica Gleaner - - OPINION & COMMENTARY -

YOU CAN’T but sup­port Par­lia­ment’s amend­ment – ap­proved by the Se­nate last Fri­day – of the Na­tional In­sur­ance Act, re­duc­ing to three, from five years, the pe­riod for manda­tory ac­tu­ar­ial re­views of the scheme.

For as the labour and so­cial se­cu­rity min­is­ter, Shahine Robin­son, said when she tabled the bill in the House in Septem­ber, more fre­quent re­views will place the Gov­ern­ment in a bet­ter po­si­tion to more closely mon­i­tor and, there­fore, make timely in­ter­ven­tions for the sus­tain­abil­ity of the scheme.

Fur­ther, Ms Robin­son noted, in­creased trans­parency and ac­count­abil­ity should flow from hav­ing more reg­u­lar re­views. Again, con­cep­tu­ally, we agree. Ex­cept that Ms Robin­son, as the Gov­ern­ment of which she is a mem­ber, has not been putting into prac­tice what she preaches. At least, not with re­spect to how they in­tend to en­sure the sus­tain­abil­ity of the Na­tional In­sur­ance Scheme (NIS).

In­deed, as we have noted twice al­ready this year, the NIS, which turned 50 this past April, is, in the ab­sence of se­ri­ous intervention by the Gov­ern­ment, in dan­ger of go­ing broke and even­tu­ally col­laps­ing, as was re­ported by the ac­tu­ar­ial firm, Eck­ler Ja­maica, at the last re­view in 2013.

That year, the NIS paid out J$12.3 bil­lion in ben­e­fits and col­lected con­tri­bu­tions of J$9.5 bil­lion, main­tain­ing a trend since the mid2000s of the scheme pay­ing out more than it col­lects from con­trib­u­tors. Over the past three years, in­flows, up 35 per cent, to J$12.8 bil­lion, have grown faster than out­flows, which in­creased by a quar­ter, to J$15.4 bil­lion. But the broad tra­jec­tory has not shifted. Its fu­ture, on the face of it, re­mains in doubt.

Look­ing for­ward, the 2013 re­view in­di­cated that the NIS, which then had as­sets of J$64 bil­lion, would in 50 years, ac­count­ing for its obli­ga­tions to cur­rent pen­sion­ers, have a deficit of J$65 bil­lion. But when all par­tic­i­pants were taken into ac­count, in­clud­ing con­trib­u­tors who are not yet en­ti­tled to ben­e­fits, that deficit would reach J$384 bil­lion. How­ever, we would not have to wait that long for a catas­tro­phe. The scheme, un­less the mat­ter is ad­dressed, will be in nega­tive cash flow by 2025 and be flat broke by 2033.

RES­CU­ING THE SCHEME

We as­sume that the Gov­ern­ment takes this mat­ter se­ri­ously and that its ex­perts are work­ing on a fix. Un­for­tu­nately, nei­ther Ms Robin­son in the House last month, nor spokesper­sons in the Se­nate last week, in­di­cated what ideas they have for res­cu­ing the scheme.

Our sense is that they, with­out ex­pla­na­tion or ev­i­dence, want us to be­lieve that they have a plan. “Let me as­sure our pen­sion­ers that they have noth­ing to worry about,” Ms Robin­son said at the scheme’s 50th an­niver­sary cel­e­bra­tion in April. “The NIS re­mains strong and vi­brant.”

Yet, we worry. The NIS’s fu­ture re­quires more than as­sur­ance; it needs tough over­haul, start­ing, we be­lieve, with lift­ing the J$1.5-mil­lion cap on in­come on which pay­ment is made and rais­ing the 2.5 per cent rate at which con­trib­u­tors pay. Laws have to be tough­ened against the Gov­ern­ment’s raid­ing of the fund and to pro­vide real penal­ties for those who don’t pay.

That would be a start for all Ja­maicans – not just the very poor – to­wards be­liev­ing that they have a real stake in the NIS and in putting it on a path to pro­vid­ing more than 11 per cent in re­place­ment in­come to re­tirees.

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