Whither the NIS?
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.