Wed | Aug 16, 2017

Editorial: NIS ... 50 years and worried

Published:Thursday | April 28, 2016 | 4:00 AM
Shahine Robinson, the labour and social security minister.

Shahine Robinson, the labour and social security minister, like the Government of which she is a member, is still new on the job, so she might not as yet be in full command of all the elements of her portfolio. In any event, people don't like to bring worrying or bad news to what should be celebratory occasions.

In that case, the minister might be forgiven for her heavy spread of sugar-coating when she spoke at a recent church service marking the 50th anniversary of Jamaica's National Insurance Scheme (NIS), which has reliably, over five decades, provided pensions and other benefits to its contributors at the end of their working lives. We might complain of the adequacy of these payments as replacement for lost income, but the NIS has been, and is, an important cushion to many of the society's most vulnerable. Often, benefits exceed contributions.

To hear Ms Robinson tell it, Jamaicans have no cause for concern that these flows will stop anytime soon, or that they should in any way be worried about the future of the NIS.

"In recent times, concerns have been expressed in various quarters about the viability of the scheme," she said. "Let me assure our pensioners that they have nothing to worry about. The NIS remains strong and vibrant. We have never in the history of the fund faltered in our payment and contributions to the Jamaican people."

The latter statement is true! But as Ms Robinson well knows, the past is no guarantee of the future. And that of the NIS is by no means assured. At least, we have not been assured of it.

Indeed, the concerns to which Minister Robinson referred stem from a 2014 report on the sustainability of the NIS done by the actuarial firm Eckler. It concluded that while the National Insurance Scheme is in danger of imminent collapse, it faces serious mid- to long-term problems.

 

SERIOUS REMEDIATION NEEDED

Indeed, unless the authorities undertake serious remediation of the scheme, it is likely that the NIS will hardly be around for another 50 years, going bankrupt well before then.

At the time of the review, the National Insurance Fund, which manages the NIS's resources, had assets of $63 billion. That year, the scheme paid out J$12.3 billion benefits and collected J$9.5 billion on contributions. When a negative return on investment and administrative costs for that year are taken into account, it had a deficit of J$8 billion. Indeed, since the second half of the last decade, the NIS has consistently paid out more than it receives in contributions.

As Eckler warned in its report, "the scheme is in an untenable position."

Looking out over 50 years, taking into account the then market value of assets and the present value of the benefits of pensioners, the NIS will have a deficit of J$65 billion. But when present active contributors, less their benefits, are taken into account, "the fund will be exhausted by 2033" and its deficit two decades later would be J$384 billion.

The situation, of course, can be reversed. Not, however, with sugar-coating, but rather with hard-nosed action, including lifting the low levels of contributions workers make to the NIS. Technocrats may be working behind the scenes on a plan. Stakeholders need to know what it is.