Get your house in order before imposing further burdens on employees and employers was the message that the Private Sector Com-mission (PSC) had yesterday for the National Insurance Scheme (NIS) and it declared that it will not support recent actuarial recommendations to hike the contribution rate and raise the pensionable age unless the Scheme is more efficiently run.
Delivered in a position paper, the PSC stance will be seen as a stinging rebuke to the government and the NIS, which had been hoping to fast-track changes on the basis of the eighth actuarial report done by Actuarial and Financial Consultants Horizonow and which was tendered to the government in October this year. That report had said that the NIS was approaching a crisis stage and needed urgent action. The report then listed a series of immediate steps, the majority of which the PSC is not willing to endorse.
In a lengthy paper released at a session with the media at the Georgetown Club, the PSC said that it was “very concerned” with the state of affairs at the Scheme as laid out in the actuarial report and wanted a national approach to fixing the problems.
It asserted that “…these reforms must be done with the intent of offering value for money service to the beneficiaries and members of the Scheme, rather than as penalties for inefficiencies and ineffectiveness of those charged with its governance and management”.
The PSC then listed the key recommendations of the Horizonow report that it could not support at this point.
These were that the contribution rate should be upped from 13% to 15% no later than January next year, increase the wage ceiling to $200,000 per month, freeze pension increases for two years and raise the pension age from 60 to 65 on a phased basis. The PSC also nixed old age pension proposals which would see pension accrual rates revised so that the maximum 60% benefit is reached after 40 years of contributions instead of 35 years and increasing the number of years over which insurable wages are averaged for old age pension calculation from three to five.
The PSC listed a host of recommendations it wants the Scheme to implement “that will impact upon the efficient and effective functioning of the Scheme (`Get their House in Order’) before it places further financial burdens on the employees and employers”.
The PSC called on the Scheme to:
* undertake a “thorough review of all operational procedures and practices with a goal of making each more efficient by using all available tools and technologies”;
*take immediate steps to upgrade or source a new Information Technology system;
*stiffen and enforce penalties for late or non-payment of contributions and introduce legal measures such as levying on the income and assets of non-compliant employers;
*Craft an appropriate investment framework to replace the current one;
*Give priority to how funds are invested, liquidity and preservation of capital rather than the rate of return;
*publish annual audited financial statements and periodic actuarial reviews;
*set up good governance practices in line with those of the International Social Security Association;
*take potent measures to lower administrative costs.
It also supported other recommendations made for efficiency and effectiveness. These include the Scheme developing links with various government departments that hand out licences so that these would only be issued if the person was NIS-compliant and discussing with the government how the Guyana Revenue Authority can collect NIS contributions and pay NIS and state pensions.
CLICO
The PSC also waded into the Scheme over the ill-fated $6B which it had invested in the now collapsed CLICO (Guyana) Inc.
The PSC said it is particularly concerned that approximately 20% of the investment portfolio had been placed with CLICO and had not been garnering any returns since CLICO was put under judicial management in 2009 and subsequently wound up. The PSC said it was of the view that had this portion of the investment been earning income the unprecedented deficit situation last year would not have happened. Noting the unanimous parliamentary resolution passed in 2009 guaranteeing state support for the recovery of the NIS investment, the PSC said it supported the call on the Guyana Government to “indicate the timeline and the nature of the guarantee and whether it will be met with cash, bonds, real estate or another financial instrument. This avenue should be explored with the utmost urgency”.
Pointing out that there had been minimal changes to the board of directors over the last 10 years and chairmanship for the last 20 years, the PSC called for a reshuffling of the board. Dr Roger Luncheon, who has chaired the NIS Board since 1992, has faced criticism during his tenure. “The PSC does not endorse the view that the entire Board should be replaced, but that retirement, rotation and replacement of directors be done on a more systematic and timely basis”.
The private sector umbrella body said it also viewed seriously the statements made by the actuary that “…there seems to be a laissez faire approach to setting and achievement of corporate goals and objectives. In many respects leadership at the top sets the tone for the success or otherwise of an organization, public or private. Unless specific goals are set and leaders are held accountable for achieving them, performance improvements will be few”. The PSC said it was worried by this statement which does not reflect well on the NIS management.
“The PSC calls on the Minister responsible to look into this situation and act upon the necessary recommendations to improve the good governance of the Scheme. This is one of the main reasons why some of the recommendations are not endorsed. Public confidence must be restored in the management of the NIS”, the private sector umbrella body declared.
The PSC attended a presentation made by the author of the eighth actuarial review, Derek Osborne, at the Office of the President on November 22, 2012. An information session was subsequently held by the PSC with representatives of the private sector where the PSC made a presentation and there was feedback from its constituents.
Critics argue that the problems pointed out in the eighth report of the actuary had been brewing for at least a decade and that the government and the Scheme had failed to act.
