Editorial | Why the silence on NIS reform?
Among the heftiest percentage hike of any programme in the Government's 2017-18 Budget is the additional J$215 million - a 44 per cent increase to J$704.3 million - the labour and social ministry plans to spend on the administration of the National Insurance Scheme (NIS). That's 23 per cent, or more than a fifth, of the ministry's allocation of just over J$3 billion.
We make no comment on the justification for the expenditure. We do not have sufficient information do so. Moreover, beyond the administrative costs, Activity 0005 of Sub-Programme 20 of the ministry's planned spend will be to "commence a programme of reform to improve the long-term stability of the scheme". So, we expect that actuaries and other experts will have to be hired and paid out of these sums.
Herein rest our concerns. If our interpretation of the scant narrative that accompanies the Budget figures is indeed the case, it seems that the Holness administration has a clear picture, or something near to it, of how it intends to proceed with the reform of the NIS to ensure its sustainability. It is just that the rest of us, the contributors and potential beneficiaries - stakeholders they sometimes call us - do not yet know.
NIS IN TROUBLE
This is a matter that the Government, for reasons we cannot comprehend, has, surprisingly, held close to its chest. People who follow these things have, for at least three years, been aware that the NIS was in trouble.
An actuarial survey in 2013 revealed that the NIS paid out nearly 30 per cent more in benefits than it received in contributions - a trend that began in the mid-2000s, which, but for minor fluctuations, was likely continue. In 2013, the NIS had assets of J$64 billion. The actuaries projected that in 50 years, not only would those assets have been long wiped out, but that scheme, based on its obligations only to current pensions, would have a deficit of J$65 billion. When contributors who are not yet pensionable are added, the deficit would be six times worse - J$384 billion.
CATASTROPHE ON HORIZON
But the horizon for the catastrophe isn't really a half-century. Unless the reforms are undertaken, the NIS will have, from contributions and investment income, a negative cash flow in only eight years from now. Worse, the scheme will be totally bust by 2033. Bear in mind here that, on average, the NIS provides pensioners a mere 11 per cent of replacement income.
A year ago, when the administration had just changed and Shahine Robinson assumed the Cabinet portfolio for the scheme, we gave her the benefit of the doubt that recency, and therefore, a lack of grasp of her portfolio, accounted for her glib, unfounded assurance to contributors at the NIS's 50th anniversary celebration "that they have nothing to worry about".
"The NIS remains strong and vibrant," she said.
We were encouraged, however, when last October, Ms Robinson piloted a bill through Parliament that reduced the scheme's mandatory actuarial intervals from five to three years and spoke of how this would allow for closer monitoring, as well as increased transparency. We expected that this would have been followed by Green and White Papers on the proposed reforms, allowing for a full discussion, involving "stakeholders", on the future of the NIS.
We are still waiting.