Dear Editor,
We are approaching the 10th anniversary of the publication of the Actuarial Report on the NIS, published in SN of November 15, 2012. There was the explicit concern of a shortfall of $1.4B, with only 6,100 employers out of 27,000 registered reported to be making the statutory contributions. The report showed that only 30% of 29,000 self-employed were actively remitting contributions.
Reasons given at the time by the Scheme’s General Manager included the following:
– An expanding informal workforce not complying with the NIS regulations
– Non-registration of employees by certain industries
– An ever aging population
– Decreasing return on investment
Unfortunately the writer cannot yet verify whether there have been subsequent reviews and if and when published.
In this connection however, the particular Actuarial Review made a number of recommendations, including the following for immediate execution:
– Raise the contribution rate from 13% to 15%
– Hike the wage ceiling to $200,000 per month
– A phased raising of the pension age from 60 to 65 (Guyana still has the lowest pensionable age in the world – 55 years)
The Actuarial Report bemoaned the fact that an NIS Reform Committee appointed by the Government in 2007 had made some recommendations, but there was no meaningful change.
The Financial Consultants at the time noted that the NIS experienced its first ever deficit in 2011 in its 42 year history – in the sum of $371M. According to SN they predicted that the “entire Fund will be exhausted in less than 10 years if the contribution rate increases and benefit reforms are not made immediately” … “the NIS should therefore engage all stakeholders and the public at large very early in reform discussions”.
These would include:
1. “Revise pension accrual rates so that the maximum 60% benefit is attained after 40 years of contribution instead of 35.
2. Lift the number of years over which insurable wages are averaged for old age pension calculation from 3 to 5 years
3. Amend the basis for pension increases from the minimum public sector wage to price inflation with a limit
4. Equalise benefit rules for males and females where differences still exist
5. Hike the minimum survivor’s pension to 50% of the minimum old age pension and up the maternity grant to at least $5,000.
6. Forge links with government departments that issue licences and permits so that these are only issued if persons are NIS compliant.
7. Strengthen and enforce penalties for late or non-payment of contributions and move to new measures such as garnishing
8. Publish annual audited financial statements and periodic actuarial reviews; and discuss the challenges facing the NIS and the reform options openly with the public
But the recommendations did not end there. It was also urged that high priority be given to, among other things:
Conduct a thorough review of the Act and Regulations; and include expunging sections that are no longer relevant; and ensure current processes are consistent with international best practices.
There were lots more observations to the extent that the SN’s Editorial of November 19, 2012 observed ‘the review drew immediate riposte from…the Minister of Finance Ashni Singh, and the long-serving Chairman of the NIS Dr. Roger Luncheon.
According to the Editorial, Singh was emphatic that the Government would ‘never let the NIS fail’. It went on to remark as follows: ‘The fact that the word ‘failed’ is referenced at all signifies the depth of neglect and disengagement shown by the government to the Scheme over the last 20 years.
How prophetic a scenario, as in 2022 the very Minister who was seen publicly to ‘reach-out’ to the Scheme’s Management about their ‘outreaching’ clients, was heard to remark that he could not help the Scheme’s management.
But by no means did the discussion on the 2012 Actuarial Report end there. On November 18, 2012 Christopher Ram in his column ‘Business Page’ did quite a comprehensive and unflattering critique of the management of the NIS as observed in the aforementioned Actuarial Report. His commentary is much too wide ranging to be contained in this submission, except however that certain observations are worth noting regarding the constitutional environment within which the NIS functions:
a) By law, the NIS is subject to a five-yearly review by actuaries whose principal task is to determine whether the scheme is operating on a sound financial basis.
b) The responsibility for the failure to deal with recommendations arising out of the 6th and 7th actuarial reports at December 31, 2001 and 2006 has been murky and confusing
c) …the decision to implement or not the recommendations of actuaries lies not with the directors but with Cabinet
Ram & McRae went on to comment on a range of subject areas, including the following, but which regrettably are too exhaustive to expand:
1. “Increase the contribution rate from 13% to 15% no later than January next year
2. Increase the wage ceiling to $200,000 per month
3. Freeze pension increases for two years or until contribution rate is increased.
4. Move up the pension age from 60 to 65 in a phased manner”
Suffice it to say that he did not necessarily agree with all the Actuary’s recommendations.
In his conclusion Ram & McRae remarked:
“The workers of the country are being called upon to pay for the inertia, intransigence and, I dare say, the stupidity of the government for more than ten years, aided by the perpetual breaches by directors of their statutory and fiduciary obligations”.
“And amid the only private sector response I have heard so far is the shameless admission that the private sector will increase its evasion of their obligations under the NIS Act as we witness with the Vat Act, the Income Tax Act and the Corporation Tax Act.”
It is in substantive recognition of the informational relevance of Ram and McRae’s article that one recommends to readers that they access the copy in SN of November 18, 2012.
Respectfully however, one must also acknowledge Anand Goolsarran’s timely but neutral contribution in his regular submission – ACCOUNTABILITY WATCH – on the very issue.
In the final analysis we all are still left to be concerned about the viability of the NIS.
Please advise on the availability of the Actuarial Reports due for 2017 and 2022.
Yours faithfully,
E.B. John
