The billion-dollar National Insurance Fund would be depleted in a quarter of a century if the current 8.8 percent contribution rate is maintained, the Minister of Housing and National Insurance Shane Gibson disclosed in the House of Assembly today.
Admitting that the looming crisis requires tough decisions, Minister Gibson, revealing key recommendations made in the latest actuarial report, said contributions would ultimately have to be tripled.
“Projections in this seventh actuarial review indicate that if the current rate of 8.8 [percent] is not increased, the National Insurance Fund would be depleted by the year 2029,” Minister Gibson said.
“If this happens contributions would have to be increased immediately from 8.8 percent to around 17 percent and with additional increases to around 25 percent between 2030 and 2060.”
Thousands of pensioners, mothers who are on maternity leave, workers injured on the job and employees on sick leave rely on financial benefits from the fund, an essential social programme with reserves of $1.2 billion.
The heaviest drain on the fund is benefits to pensioners. At the end of this month, over 24,000 elderly Bahamians will receive pension cheques totalling over $6 million.
The NIB will pay out an additional $3 million in short term and industrial benefits. The National Insurance Minister pointed out that while the fund’s reserves of $1.2 billion is today considered adequate, the staggering amount is still less than the value of benefits already earned by past and present contributors, with benefits to the elderly being the largest.
Although over the past 40 years the fertility rate has decreased with two children per mother, the Bahamian population is growing older at a faster rate. Less than 6 percent of the population is over the age of 65; a figure that is projected to increase to over 20 percent by the year 2061.
“The stark reality is that the longer we defer our decision to make the necessary reforms and increase the contribution rate, the more severe will be the changes needed in the long term if the NIB is to continue to fulfil its mandate to its contributors,” Mr. Gibson explained.
“In this report the actuary makes several recommendations and if implemented will go a long way toward decreasing the need for having to resort the more drastic or severe measures when the NIB reaches the crisis stage,” he said.
The other rationale the Minister expressed was that one of the alternatives cannot be a reduction in National Insurance benefits.
The proposed changes to the Fund would require legislative amendments to the National Insurance Act.
But before that step is taken, the Minister suggested arranging a seminar for parliamentarians to provide a platform of discussion on the actuarial report and appointing a commission to stimulate more dialogue.
By Tameka Lundy, The Bahama Journal
