NIS wants to impose 2% increase on contributions

The Keith Mitchell Administration appears to be testing the waters ahead of legislative changes that would push the retirement age higher and increase individual contributions to the National Insurance Fund.

Dorset Cromwell – the bearer of bad news

The NIS is conducting a series of consultations and Town Hall meetings on the issue.

According to Director Dorset Cromwell, the state-controlled body has been instructed by government to consult with the public and he considers this a strong signal that they are serious about making changes to the NIS Act of 1983.

Social Security Minister Nickolas Steele has not made any public comments on the situation facing the NIS.

The twelfth Actuarial Report was completed recently and again they are strongly recommending that in order to make the Scheme sustainable, certain parametric changes must take place.

Based on data presented recently, the Pension Fund reserves will be empty by 2035 and at that time Grenada would have no choice but to raise contributions to thirty-three percent.

The NIS is reporting that income from contributions is falling below expenditure, a situation that would force the scheme to pay benefits from its reserves and investment income.

Cromwell acknowledged that the financial situation is precarious and in 2016 benefits were paid out of investment income.

The NIS has fifty-two thousand registered contributors, almost $1-billion in local, regional and international investments and over a billion dollars in reserves.

According to the NIS, to stave off a 2035 meltdown, Grenada must undertake a gradual raising of the retirement age over a decade, from sixty to sixty-five years and increase individual contributions by two percent, from the current nine percent shared between employer and employee.

The pensionable age would rise by one year every three years with the option to retire before the established time. Where the early retirement option is taken there would be a six percent cut in pension.

A major question being asked is what impact has government’s heavy borrowing from the fund had on the dim future being presented for the NIS.

The Fund’s exposure to government now stands at $211 million and though NIS officials are quick to point out these days, that the State is now up to date on its debt service to the fund, contributors to the fund remain unimpressed.

The NIS Board has set a limit of twenty-five percent on government borrowing/investments and current figures shows a twenty-three percent exposure.

According to the Head of the NIS, it is the only Fund in the Eastern Caribbean that has not made any changes to greater sustainability.

Cromwell said government has ignored eleven Actuarial reports over the years, which continuously recommend the changes being considered now, which can only happen by Acts of Parliament.

One of the major challenges for the NIS is that the birth rate projected in 1983 when the NIS started, has fallen, meaning there are less persons in the work force contributing.

NIS contributions have also suffered because of Grenada’s relatively high unemployment rate.

There are conflicting reports about the true unemployment figure on the island.

Prime Minister Dr. Keith Mitchell has consistently stated that it was approaching 40% when he returned to office in 2013 but was told by officials of the Central Statistical Office (CSO) that it was hovering around the 30% mark.

The NIS wants to raise the retirement age because according to statistics life expectancy has increased and with people living longer the larger will be the pension payout.

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