|Authored by:||Matt Maura|
|Source:||Bahamas Information Services|
|Date:||June 22, 2023|
NASSAU, The Bahamas – Contributors to the National Insurance Board Plan will have one year to prepare for a contribution rate increase that is scheduled for July 2024.
The rate increase will mark just the second increase -- the first was by 1 per cent in 2010 which coincided with the implementation of the permanent phase of the unemployment benefit -- in almost 50 years of the Fund’s existence.
The increase will be shared equally between employers and employees. For example, if the rate increases by 1.5%, the employers' portion rises from 5.9% to 6.65%, and the employees' portion increases from 3.9% to 4.65%.
In the first year, paying the minimum weekly wage of $260, will increase the employers' portion from $15.34 to $17.29. Employees' contribution payments on the minimum weekly wage will increase from $10.14 to $12.09. For both the employer and employee, this represents a difference of $1.95 per week.
For monthly salaries on the minimum wage of $1,127.67, employers and employees will pay a difference of $8.45 per month.
“Madame Speaker, this is less than the cost of a meal at any of our fast food restaurants. This is a small price to pay to secure our pensions for the future,” Minister of State in the Office of the Prime Minister with responsibility for National Insurance, the Hon. Myles K. LaRoda noted.
Employers' weekly payment on a ceiling of $740.00 will increase from $43.66 to $49.21. Employees' contribution payments on the ceiling of $740.00 will increase from $28.86 to $34.41. For both the employer and employee, this represents a difference of $5.55 per week. For monthly salaries on the ceiling of $3,207.00, employers and employees will pay a difference of $24.05.
Addressing Parliament during his Contribution to the 2023/24 Budget Debate, State-Minister LaRoda said the increase was due to a number of factors.
“For some time now, there has been discussion in the public about the state of NIB. Much of this discussion emanated from the 11th Actuarial Review conducted by the International Labor Organisation (IL O) in December 2018. I tabled the report in these Honourable Chambers last year.
“The Report predicts that the NIB fund will be depleted by 2028 based on its current benefits package and contribution rate and considering the projected population demographics. Key among these are: A lower fertility rate than in past decades refers to the number of children each woman has. This rate was about two children historically and is projected to be 1.7 children for most of the period under review, and an increase in life expectancy; our people are simply living longer, and this trend continues over the projection period that the report covers (60 years). On average, pensioners are expected to live four years longer than at present.
“What does this translate into? Today we have approximately four contributors for each pensioner. By 2078, it is projected that we will have 1.4 contributors for each pensioner, a sharp decline. Looking at it another way, while persons over 65 made up approximately 8% of the population in 2020, by the end of the review period (2078), retirees are projected to make up 26% of the population.”
State-Minister LaRoda said compared with Caribbean Social Security programmes, NIB has one of the lowest rates, but offers the same, or more benefits, of those programmes with the exception of Barbados.
NIB offers a total of eleven Benefits as income replacement for those who are unable to work or have work-related injuries; provides assistance to individuals who do not have sufficient contributions to qualify for a benefit; and an unemployment benefit – a branch of national insurance now being considered for inclusion in other Caribbean countries.
Additional offerings include: Pension payments of over $26 million each month to over 44,000 pensioners; Injury Benefit to workers injured on the first day on the job who may have never paid into National Insurance; Bahamian mothers have access to Maternity Benefits for each live birth—a crucial support system for both the mother and child.
“Most countries do not provide an unemployment benefit, but their contribution rate exceeds that of NIB Bahamas,” Mr. LaRoda continued. “Across the region, the contribution rate averages 12% (NIB is under 10), and several countries already have approved contribution rate increases in place over the next few years.”
Mr. LaRoda said of even greater significance is the sharp increase in benefit payments to NIB's contributors and dependents. These benefits had mushroomed from $8 million in 1981, when the programme was in its infancy stage, to $354 million in 2022 as a mature scheme.
“Can you imagine the degradation and the displacement of our people that would have occurred if this $354 million were not put into our economy last year? The Scheme serves and continues to serve its purpose as a social safety net for Bahamians from all walks of life.”
State-Minister LaRoda said over the last ten years, the average number of pensioners being paid every month has increased by over 35%.
“This,” he said, “is driving the increase in benefit expenses, coupled with the fact that each year the average benefit per recipient increases as first-time pensioners are being paid higher benefits than in prior years. As you know, NIB adjusts the insurable wage ceiling every two years, and this translates to higher benefits for those who pay at the higher ceiling.”
State-Minister LaRoda said in the past, NIB's income exceeded its expenses resulting in the build-up of its reserves - peaking at $1.75 billion in 2016. In 2016, the benefits expenses exceeded contribution income by $14 million; in that year, NIB reported an overall deficit of $15.8 million. Every year since, benefits have exceeded contributions, and the difference between the two continues to grow. In 2022 the NIB's reserves stood at $1.4 billion.
The deficits recorded by NIB continue into 2023. The budgeted deficit for this year is $97.6 million, driven mainly by benefits exceeding contributions by $86 million.
“This trend can only be sustained for a short time,” Mr. LaRoda told Parliament.
State-Minister LaRoda said the ILO Report recommended an immediate, sustained, and systematic increase in the contribution rate to secure the fund in the short term.
“This call for an increase in the rate was also anticipated from earlier actuarial reports. It also identifies other options that can be considered for the long-term design of the plan. At this time, it is considered to increase the Contribution Rate every two years for some time. A staggered implementation aims to allow businesses and workers adequate time to adjust their budgets accordingly while still ensuring the system's sustainability in the future,” State-Minister LaRoda added. (BIS Photo/Anthon Thompson)
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