NIS increase won't close funding gap
Avia Collinder, Business Writer
Jamaica's social security scheme is projecting that the gap between collections and pension distributions will widen by another J$100 million, notwithstanding an increase in contributions that went into effect on January 7.
Denzil Thorpe, director of the National Insurance Scheme (NIS) told Wednesday Business that benefits contributions are expected to grow by J$1.4 billion, but that benefits will increase by a larger J$1.5 billion.
The insurable wage ceiling for National Insurance Scheme (NIS) and National Insurance Fund (NIF) contributions has been increased from J$1 million to J$1.5 million.
The contribution rate remains at five per cent of gross salary - that is, 2.5 per cent from the employee matched by 2.5 per cent from the employer.
However, the contribution rate for domestic workers, voluntary contributors and self-employed persons will be increased from J$50 to $100 per week.
Thorpe said that only 20 per cent of contributors earn above the J$1-million mark. While it is projected that monthly contributions will increase by approximately J$116 million, the increase in benefit payments is projected to be in the region of J$125 million per month, he said.
The payouts are predicated on a 16.66 per cent increase in pension benefits being implemented by the NIF this year. There will be no increase in employment-injury benefits.
Categories in which there have been increases include widow's/ widower's pension, dependent spouse's allowance, orphan's/special child's allowance, sugar worker's pension, special anniversary pension; as well as grants for old age, invalidity, widow's/widower's grants, orphan's/ special child's grants, and funeral grants.
NIS contributions for year ending March 2013 were projected at J$12.06 billion, and payouts at J$12.58 billion - a gap of J$520 million.
However, with the annual allocations to the NIF, net NIS collections are expected to amount to J$9.65 billion, which widens the gap to just about J$3 billion for this fiscal year.
The NIS director declined to comment on the impact of increased disbursals on the sustainability of the NIF, whose assets now amount to J$71 billion.