The troubled National Insurance Scheme (NIS) announced yesterday that the monthly insurable income ceiling will rise by 17% effective from October 1, 2015.
In a notice in the Mirror newspaper, the NIS said that the monthly figure will move from $170,812 to $200,000 per month. The $200,000 figure had been recommended by an actuarial report in 2012 and the Scheme then embarked on phased increases.
Today’s notice said that the weekly figure will move from $39,418 to $46,154.
The insurable income ceiling is the upper limit on earnings that attract NIS contributions.
The government and the NIS face critical decisions on the way forward as the Scheme has begun to suffer a deficit of income over expenditure. The new insurable income ceiling will give it more in contributions.
In this year’s budget the government had announced that contributions to the NIS would now be tax free. The hiking of the ceiling would effectively nullify any tax savings this year.
The total percentage payable is 14% of insurable earnings for employees earning more than $50,000 and 13 % of insurable earnings for employees earning $50,000.00 and less per month.
The previous insurable income ceiling was in place from January 1 this year. The insurable income ceiling was raised twice in 2013.
The Eighth Actuarial Review of the Scheme in 2012 declared that the NIS was nearing a crisis and immediate steps were required to pull it back from the brink including raising the contribution rate from 13% to 15% no later than January 2013, hiking the insurable income ceiling to $200,000 per month, freezing pension increases and raising, in a phased manner, the pensionable age from 60 to 65.
A raft of other measures was enunciated in the report which set out the jeopardy faced by the Scheme and other dangers such as an unbalanced investment portfolio and a low number of contributors.
Minister of Finance Winston Jordan in this year’s budget adverted to the problems facing the NIS. “With respect to the NIS, this organization is beset with a number of problems. It has investments amounting to $5.2 billion that are ensnared in the Clico debacle. That represents more than 20 per cent of its assets that is not earning income. The actuaries have projected that the Scheme is in trouble and something has to be done urgently to address the problem,” he told the National Assembly in his Budget 2015 presentation in August.
He recalled Resolution No 82 of 2009 which was passed by the National Assembly “call[ing] upon the Government to take all possible actions to secure the investments made in CLICO (Guyana) by the NIS on behalf of contributors and beneficiaries of the Scheme to prevent any consequential loss in benefits to them.
“Sadly, the PPP/C Government did nothing on that Resolution, resulting in a persistent deterioration in the Scheme’s financial position. A new Board of Directors has been appointed. I will, shortly, be meeting with that Board and charging them with the responsibility, after consultation with the Actuary, to come up with solutions to address the underlying problems of the Scheme,” Jordan told the House.
Clico collapsed in 2009. Clico (Guyana) had invested $6.9 billion (US$34 million) in Clico (Bahamas) which represented 53% of the local company’s assets.
Although this investment was liquid on paper, subsequent investigations revealed that this sum was tied up in real estate investments that Clico (Bahamas) had in Florida through subsidiaries. When Clico (Bahamas) was ordered liquidated, the local company was subsequently placed under judicial management.
