by Linda Straker
- Changes to include increases in pension age, contributions, and amending survivors’ benefits clauses
- Increase in pension age biggest worry for those managing NIS at this time
- Scheme continues to pay out more than it receives
- Without intervention, within next 10 years, there will be no NIS
The National Insurance Scheme (NIS) is to undergo significant legislative changes to stop it from becoming bankrupt in the next decade.
“This Government intends to act, and we intend to act quickly …this National Insurance Scheme is staring bankruptcy in its face if we do not take the necessary measures to ensure that the fund is put on a sustainable path,” Prime Minister Dickon Mitchell said on Tuesday during the Government’s post-Cabinet news conference.
He disclosed that some major stakeholders, such as trade unions and the Public Service Commission, are willing to do what is necessary to facilitate the changes to save the Scheme which was established in April 1983. In Grenada, NIS is equivalent to “Social Security” in other countries.
“And the fact that the major players have indicated their willingness to support the changes and had called upon the prior administration to act is testimony of the fact that we are partly in this situation because of past failure to act and we cannot continue like that.” The Prime Minister did not indicate how soon these changes would be presented to Parliament for approval.
However, before the legislative changes are placed before Parliament, a public education campaign will explain the justification for the changes. Among the changes will be an increase in the pension age, an increase in contribution, and repealing or amending clauses pertaining to survivors’ benefits.
Phillip Telesford, who is the Minister responsible for NIS said that the Board of NIS has made numerous submissions to the previous New National Party (NNP) Government for specific interventions and certain actions by way of legislative changes for strengthening to ensure that the Scheme remains sustainable and that the pensions that will be payable at some stage to employees are secured.
“What we have noticed is that a lot of these recommendations are still in their embryonic stage. Cabinet has approved but no further steps taken in order to ensure that the proper changes have been made. We have reviewed all of that and have come to the conclusion that immediate intervention and careful intervention has to be administered in order to save the NIS,” he said.
Telesford said that the increase in pension age is causing the biggest worry for those who currently manage the NIS. “From the 7th Actuary Review back in 2004 to present, every single time, the Actuary requested that the requirement age be amended. Over the last 18 years or so, the recommendations have been made for the amendment of the retirement age.” Telesford reiterated that the Scheme continues to pay out more that it receives.
“The NIS presently is breaking deposits to pay pensioners because the inflows, the income from the payment of NIS dues is less than the benefits that is paid out under the NIS Act. Notwithstanding that we have a very youthful population, we are still at this stage paying out more than we collect. Every year, NIS has to be breaking deposits to facilitate the payment of pension to retirees,” he said.
“That is unsustainable. As a matter of fact, if the NIS were to continue like this within the next 10 years or so there will be no NIS. We have looked at information from throughout the region and we recognise that Grenada is behind when it comes to legislative changes to the Scheme. Grenada needs to do what is necessary at this stage to shift the retirement age gradually from age 60 to 65. That recommendation was made several times since 2004 by the Actuary until now,” he added.
According to the 2020 NIS Annual Report which was tabled in the Houses of Parliament in 2021, the year 2020 was one in which the National Insurance Board (NIB) demonstrated its ability to overcome challenges while remaining focused on the continuous improvement and sustainability of the Fund. “For the first time in its 37-year history, the NIB engaged in parametric changes aimed at addressing the financial pressures on the Scheme in keeping with the recommendations of multiple Actuarial Reviews.” The report pointed out that in January 2020, the contribution rate increased from 9% to 11%.
“This was the first of the 2 recommendations made by the Actuary in the 11th Actuarial Review. Although the Government, as part of its stimulus measures reverted the rate to 9% in April, it returned to 11% on 1 August 2020. Additionally, work commenced in earnest to legislate the increase in the pensionable age,” said the report which shows that the increase in pension age from 60 to 65 should be done over a 10-year period starting in 2023 when the age will increase to 61.
The next change will in the year 2025 when the age will increase to 62; then in 2027 when the age will be increase to 63; in 2029 the age will increase to 64 and by 2031 it should reach 65.
The labour employment legislation does not have an age of retirement. The retirement age starts at 50 for some public service professions, while the private sector is based on the NIS Act.
