By KHRISNA RUSSELL
Tribune Chief Reporter
WITH a possible six-year insolvency timeline set for the National Insurance Board fund, a noted banker has said the harsh reality is if higher than normal administrative costs are not adjusted and contributions raised, people with more than 20 years to retirement may have no benefit to look forward to.
For this reason, Fidelity Bank Bahamas’ chief executive Gowon Bowe said it is simply not enough for Prime Minister Philip “Brave” Davis to have said contributions will not increase, adding in this current climate “there is no free lunch.”
Mr Bowe suggested that Mr Davis’ response to Minister of State in the OPM Myles Laroda’s foreshadowing of a contribution increase was more of a “political” reaction to allay the concerns of people about a perceived cost of living hike.
“I think Minister Laroda, people can argue that it may have been a very blunt way of articulating the circumstances, but the harsh reality is we are facing very blunt circumstances and I think unfortunately I think the prime minister’s communication was more to allay people’s concerns about the cost of living adjustment and all that is taking place, but there is no free lunch in this environment,” Mr Bowe told The Tribune yesterday.
“If contribution rates are not amended, if administration costs are not adjusted, the reality is National Insurance will be insolvent.
“What does that mean? That means individuals like you and me, persons who are under 45 who have more than 20 years to retire, it is a very real possibility that even after paying contributions for the better part of 20 years of a working life, will have nothing being returned to them and is that equitable?”
He continued: “So, when we sit and we look at this story of National Insurance it really is boiling down to saying that we’ve already exhibited the bad pattern of behaviour and the unwillingness to make the tough decisions in the past and we are now faced with and the reason it is becoming so pertinent is because we are faced within an election cycle or thereabouts there could be insolvency and so now there is a panic.
“But this is something known to us for more than a decade probably closer to two decades and so if we are not taking the steps to say that all who contributed to the fund will in fact be able to benefit from the fund, then what we are saying, although not appreciating, is we are saying to people contributing today but 20 to 25 years away from retirement is that you are contributing really for your forefathers — grandparents, etc — because despite your contribution you will have no benefit. I don’t think that’s the message we want to send.
“So, what we have is a circumstance that, yes, those who are contributing today are making up for the shortfalls of those who did not contribute adequately in the past, but the reality is we are where we are and now need to make the decisions so the fund remains solvent, viable and remains to provide the benefits for a very large percentage of the population who are without any alternate form of benefits,” Mr Bowe said.
Last week, Mr Laroda told The Tribune that the 11th actuarial review into the fund predicted depletion by 2028 should urgent action not be taken.
This announcement was followed by an assertion that contributions would likely have to increase within a year to sustain the fund.
However, Prime Minister Davis insisted that while an increase would be considered there would be none until the government is able to bring relief to Bahamians who face many issues that have been cause for great concern.