NIS still solid despite need for pension reform – Haynes

Although the National Insurance Services (NIS) must implement pension reform, its Director Stewart Haynes says that the social security institution is “still solid.”

Haynes made the point on Sunday August 6, while speaking as a guest on WE FM’s ‘Issue at Hand’ programme.

The NIS was formed in 1987 and Haynes pointed out that the steady growth of the informal sector and self employed persons present a challenge for social security sustainability.

The informal sector includes farmers, fishers, vendors, van drivers and other such workers, all of whom may not be making contributions to the NIS.

“The ratio of workers to pensioners is critical,” Haynes noted, as he stated that in the region, pensioners are growing faster than the working population.

“That is a challenge for social security globally,” he pointed out. At present, the NIS has a contribution rate of 10 per cent and according to Haynes, the NIS “could pay benefits for the next 12 years.”

The Director further explained that benefits are paid using contributions from workers and investment income, and money in its reserve is used to “cushion” excess expenditure.

Based on the 11th actuarial review, it is projected that NIS funds could be depleted in 2034 if the necessary changes are not made.

Although the projection paints a picture which is not so bright, Haynes confidently stated “currently we can pay our bills.”

He added that the NIS has a large reserve, which is tapped into to meet payments.

“However, we face medium term and long term challenges,” Haynes said as he spoke about the unsustainably of the NIS as it stands now.

As it is now, the NIS can only continue to pay it’s bills up to the next 12 years.

“We want to avoid a crisis 13 years from now; and hence we are proposing the reform measures.”

Haynes stressed that the recommended reform measures are to ensure that the NIS can “push the fund sufficiency or the depletion date from 2034 to later.”

Among these recommendations is increasing the contribution rate from 10 per cent and increasing the retirement age from 65 years old.

While on the programme on Sunday, Haynes noted that increasing the retirement age would mean a longer period of paying contributions; which will in turn increase the income of the NIS.

The Director sees the NIS as a “critical national safety net,” since it is the only source of income for 80 per cent of retirees in St Vincent and the Grenadines.

He added that the NIS is important in touching lives and livelihood and averting poverty in St Vincent and the Grenadines.

In a ministerial statement delivered in Parliament last month, Finance Minister Camillo Gonsalves assured Vincentians that there is “no need to panic” about the reform measures which will be put in place to ensure the sustainability of the NIS.

The recommended reform measures form part of the NIS’ 11th actuarial review.

On Sunday, Haynes reported “we are now in the process of conducting the 12th actuarial valuation report.”

This report covers 2020, 2021 and 2022 and it is expected to be completed by by October this year.