By NEIL HARTNELL
Tribune Business Editor
nhartnell@tribunemedia.net
The National Insurance Board’s (NIB) confirmation yesterday that benefit payouts exceeded contribution income by $70m for 2021 shows The Bahamas has “clearly run out of time” to address its woes without inflicting pain.
Matt Aubry, the Organisation for Responsible Governance’s (ORG) executive director, told Tribune Business that the social security system’s affirmation that “more is going out than is coming in” - a state of affairs that has now existed for six years - proves it is “in dire straits” with respect to long-term solvency.
He spoke out after NIB, in responding to social media allegations about property investments, said in a statement: “NIB further advises that while the reserves of the NIB have grown over the life of the Fund and now stand at $1.5bn, the reserves are currently in a state of decline principally because the amount of benefits paid annually have exceeded the amount of annual contribution income received from 2016.
“Given the current structure of the social security programme, the contribution rate and the number of pensioners receiving benefits, this trend will continue, and the differential between benefits and contributions will increase. For the fiscal year ended December 2021, the benefits payments to the public exceeded the contribution income by $70m.”
Mr Aubry said this merely reinforced the need to secure NIB’s long-term viability and sustainability given the thousands of pension beneficiaries, unemployed, sick and invalids that rely on its payments. “It’s in dire straits, and we’re talking 2028 in the short-term and 2030 in the long-term,” he added of the dates for when the $1.5bn reserve fund is projected to be exhausted.
“I don’t think there’s a magical solution. I don’t think there’s a lazy solution. I don’t think there’s anything that we’re going to come up with magically that will take the burden off, but we’ve clearly run out of time to deal with this in a way that doesn’t put people in a state of crisis projection. I think it says it very clearly that there’s a problem, more is going out than is coming in, and that has been going on since 2016.”
The ORG chief said it was vital that the Government get private sector and public buy-in for reforms to rescue NIB as this would make any fall-out easier to accept, whether it involves increasing the retirement age from the present 65 years-old; raising contribution rates; higher hikes in the insurable wage ceiling; increasing the number of contributions before benefits can be accessed - or a combination of all these solutions.
Consulting the public, and developing a plan with their input, would ensure that “when pain points happen they are not seen as put upon”. NIB’s statement comes as the 11th actuarial report on its financial soundness called for a two percentage point increase in contribution rates to be implemented by July 1, with subsequent further hikes enacted every two years until 2036 to secure the social security system’s long-term sustainability.
That July 1 date has come and gone with no rate increase. The Prime Minister, speaking on his return from the Commonwealth Heads of Government summit in Rwanda last week, affirmed his previous stance that the Government will not implement the NIB contribution increase - which would take the overall rate from 9.8 percent to 11.8 percent, split between employer and employee - while his administration explores ways to ease the financial burden this will impose.
Larry Gibson, chief operating officer of CG Atlantic Pensions, and who has long advocated for comprehensive pension and social security reform in The Bahamas, told Tribune Business there are a combination of policy changes that can make saving NIB “less painful” than solely increasing contribution rates for both businesses and workers.
These reform options include raising the “official” retirement age to 67, increasing the contributions required to become eligible for benefits, and further insurable wage ceiling increases. NIB’s present reality was predicted more than two decades by its seventh actuarial review, completed in 2001, which forecast that “reserves are projected to become exhausted” by 2029 if comprehensive reforms are not implemented to stop benefit payouts exceeding contribution income.
“It’s not like the sky is falling in,” Mr Gibson told Tribune Business, despite actuarial projections that NIB’s $1.5bn reserve fund will be totally depleted in just six years’ time by 2028. “There are definite policy prescriptions. We really need to set up for the long-term. What we need is some commitment to work towards them and address it.
“My message is that there are policy prescriptions and it’s going to be a combination of those factors. We need to find a way to somehow decouple these decisions with regard to long-term funding of NIB from the short-day political nuances. It shouldn’t be the prime or only vehicle to fund government projects.
“It’s a strategic investment pool to support NIB’s really core objectives. That’s the social element. It shouldn’t be operating as a Ministry of Social Services or Housing. We need to look at a genuine long-term strategy that is not attached to a government department.”
Comments
hrysippus 1 year, 9 months ago
A good time to post this one again perhaps?
This national insurance board, ... . .Lends out more than it can afford,. ... Propping up a failing bank, ... ... ... .Like climbing on the Titanic as it sank...... .... ..Or lending monies to Bahamasair.......That disappears like my receding hair...... .... ...And paying their staff more than they need,............ . . ..And plenty unemployed to feed........ .. . Forty nine years of mismanagement... .. ...
..They have wasted most that we contributors lent........Sigh...
tribanon 1 year, 9 months ago
The National Insurance Fund is nothing but a Ponzi scheme thanks to successive corrupt PLP and FNM governments treating it as their very 'own' cookie jar.
tribanon 1 year, 9 months ago
Here's another post from the past very worthy of posting again:
It's now way too late to prevent the inevitable financial collapse of the National Insurance Fund caused by the gross incompetence and greed of successive corrupt FNM and PLP administrations alike. From its inception the administrative costs of running the National Insurance Fund have been outrageously excessive due to its grossly over-bloated headcount combined with greedy crony consultants of every kind constantly sucking on it, not to mention the heavy toll taken by outright and unchecked fraud.
And of course, the National Insurance Fund's bank accounts will continue to be wrongfully used whenever possible by successive corrupt PLP and FNM administrations as a "go to" cookie jar to make all sorts of wasteful and inappropriate investments with total disregard of the NIB's fiduciary obligations and projected liquidity needs for our aging population.
So along comes the very same people, who for decades have played a big role in the impending collapse of the National Insurance Fund, people like Davis and Gibson, trying to now convince those of us who have been making our National Insurance contributions for many years, that we are somehow responsible for its impending collapse by not contributing enough. Talk about audacious gall !!
No matter what the very cruel Davis may now say, he will very soon be seeking to have employers and employees bail-out this defunct Ponzi scheme by way of higher, in fact exorbitant, additional contributions, combined with significantly reduced retirement benefits. But in these extraordinarily difficult times, Davis and Shameless Shane Gibson are gravely mistaken if they foolishly think blood can somehow be had from a stone. The Bahamian people are completely tapped out like they have never been before, thanks in great part to decades of corrupt government activities of the kind Davis and Gibson are well familiar with.
tribanon 1 year, 9 months ago
Yet another worthy post from the past:
The corrupt, incompetent, and elitist political ruling class in our country, both of the PLP and FNM persuasion, will never ever admit that they are responsible for having bankrupted the national insurance fund. From day one they ran it like a Ponzi scheme with little or no regard for the longer-term fiduciary obligations associated with its intended social security purpose.
And now the very cruel Davis wants to squeeze even more out of the thousands of contributors to this national insurance fund over many years who are finally beginning to wake up to the fact that the benefits they were hoping to get back in their retirement years will either never be received or will be significantly reduced.
Yup, here we see the outcome of decades of unbridled greed by our very corrupt political ruling class. Yet cruel Davis will soon be calling for us to put even more of our cookies into 'his' cookie jar, all the while knowing that we will likely never get to eat any of them at the end of the day.
Maximilianotto 1 year, 9 months ago
Fact is NIB has zero reserves unless some auditors would consider government bonds as an asset. Bitcoin is better, Warren Buffet however wouldn’t pay $25.00. So zero of zero is zero.
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