Mon | Sep 25, 2017

Editorial | Get a move on NIS fix

Published:Friday | July 29, 2016 | 7:00 AM

Three months ago, given the recency of her appointment, we gave Shahine Robinson a pass for her sugar-coating of the issues facing Jamaica's National Insurance Scheme (NIS) and her blanket assurance to contributors of its long-term viability. Ms Robinson, the labour and social security minister, in that speech marking the 50th anniversary of the NIS, didn't provide the basis of her guarantee.

The requirement for her, and, more broadly, the Government, to do so grows more urgent, as has been highlighted by a group of experts whose views were reported by this newspaper yesterday. For as the demands on the NIS expand, its capacity to deliver declines.

Indeed, in 2013, when the firm Eckler Jamaica conducted an actuarial review of the NIS, it concluded that in the absence of radical intervention, its long-term health was far from good. The scheme was paying out more in benefits then it was collecting in contributions and investment income.

That year, for instance, the NIS paid J$12.3 billion in benefits, against the J$9.5 billion it received in contributions. There was the approximately $4.5 billion in negative returns on investments, plus the $700 million in operating expenses. The upshot: a deficit of J$8 billion. The NIS has been paying out more than it receives in contributions since 2008.

That, though, is not the entire picture. With the market value of the NIS's assets at around J$64 billion, Eckler determined that at the present value of benefits, and taking in only current pensioners, the scheme, over the next 50 years, would have a deficit of J$65 billion. Accounting for all participants, contributors, and pensioners, the deficit rockets to J$384 billion. However, the catastrophe will be felt long before then. At the current rate, the NIS will have a negative cash flow by 2025 and will be absolutely broke by 2033.

So what does the Government intend to do about it, assuming it believes that the NIS is worth saving?

 

CONSEQUENCES NEEDED

 

The administration can get no better advice than that offered by Constance Dalmadge Hall, the principal of Eckler and primary author of the actuarial review, and echoed by others at a forum hosted by this newspaper. Strengthen the law to ensure that there are real consequences for people who do not pay, or hand over NIS contributions; enforce that law; manage the fund properly; and create a firewall against the Government dipping into people's contributions.

As Ms Dalmadge Hall remarked: "If you live in the United States and you do not pay your social security contributions, they come after you ... . In Jamaica, you do not pay and there is no consequence."

More people, beyond low-income beneficiaries, have to be made to believe that there is value in contributing to the NIS, which, on average, provides a replacement income of between 10 per cent and 11 per cent to retirees. As Eckler noted in its analysis: "The dilemma is that the fund is not sustainable with current benefits, but the benefits are inadequate."

As those who weighed in on the issue recommended, it's past time to raise the J$1.5-million salary ceiling on which Jamaicans pay NIS and the 2.5 per cent rate at which employees, matched by their employers, contribute.

It just requires some political will to get a move on it.