Opposition Leader Arnhim Eustace is again warning the government to take the necessary actions to ensure that the National Insurance Services (NIS) remains strong and viable.{{more}}

At a press conference of the New Democratic Party (NDP) on Tuesday, Eustace revealed that the latest actuarial review completed in 2008 showed that unless changes are made in the 8% contribution rate to the NIS, the institution will not have enough sufficient funds to cover its expenses after the year 2016, and the service will have to resort to the use of investment income to cover expenses.

According to the report read by Eustace, NIS profits have plummeted from $27.0 million in 2008 to 5.6 million in 2010.

“The NIS has $62.0 million exposed to BAICO/CLICO. It is important to note that this report was issued prior to the collapse of BAICO/CLICO. Since that time, the situation has worsened with the potential loss of that $62.0 million as a result of the collapse of BAICO/CLICO,” he said.

Eustace, a former minister of finance, also noted that the report indicated that Reserves will start falling in 2027, and will disappear completely by 2040.

He, therefore, said the NIS system must be reformed, and these reforms include: an increase in the worker’s contribution above the current 3.5%, increase in the employer’s contributions above the 4.5% and an increase in the retirement age.

“For years, I have been issuing warnings to the government that the NIS had to operate with the three main considerations,” he said.

The three considerations Eustace was referring to include: Safety – that is, of the resources entrusted to it by the people of this country; Liquidity – ensuring that the cash resources are sufficient to fund benefits payable to its members, and the third is Yield – ensuring that it maximizes earning on investments.

Eustace said that all financial institutions, including the NIS and commercial banks, must have prudential guidelines which seek to limit the amount of funds invested in any one institution.

“In this context, I am concerned about the investment and the amount held in BAICO/CLICO – $62 million and approximately $50 million in National Properties,” he added.

According to the former Prime Minister, these and other factors have contributed to the major problems at the NIS.

“The government must take full responsibilities for this unacceptable situation.”

He warned that the government must also take the necessary actions to ensure that the NIS remains a strong and viable institution.

“…It is you, the employer and employee, who will be called upon to pay the cost. Otherwise, the whole NIS system will collapse, and with the pensions and the benefits that accrue to the workers of this country, since the government itself, due to its poor management of the economy, is incapable of providing the necessary resources to rescue the NIS,” Eustace said.

Meanwhile, Prime Minister and Minister of Finance, Dr. Ralph Gonsalves, in his recent Budget presentation outlined the problems in relation to both the National Insurance Services (NIS) and Public Service pension regimes.

The Prime Minister stated that the NIS currently has a low contribution rate of only 8 per cent of wages, while it offers what he termed “a generous pension” of up to 60 per cent of average wages, based on a worker’s three best out of the last 15 years.

It was further explained that the full impact of the system’s generosity was yet to be realized, because the NIS was fairly young and current beneficiaries retired well below the sixty per cent maximum.

According to Dr. Gonsalves over the next twenty years, replacement rates will approach their maximum levels and cash flow will turn negative this year.

He further stated that the latest actuarial report suggested that under the plausible conditions the NIS reserves could be depleted by 2039, and benefits and administrative expenses will exceed income as early as 2025.(AA)