The Social Security Reform Commission, appointed to review the country’s national insurance system and make recommendations to the government on how to ensure its sustainability, urged the government on Wednesday to make sweeping changes to the 30-year-old benefits programme. ﾠ
Recently completing a 10-month review of 13 key recommendations to maintain proper funding of the billion-dollar national insurance programme, the commission presented an interim report of its findings to the government on August 3.
Yesterday, commission members met with the media to publicly reveal the results of their study.
Pointing out that personal savings by members of the public, private pension plans and the government-sponsored national insurance scheme are the three pillars of the country’s social security system, Commission Chairman Alfred Stewart said two of those components entail inherent limitations.
“In The Bahamas personal savings is virtually non-existent – very few people set aside funds for retirement,” said Mr. Stewart.
He added, “We do have a number of private pension plans, but unfortunately they only cover about 30 percent of the workforce.”
The commission chairman pointed out that the national insurance scheme provides up to 60 percent of pre-retirement income for low to middle income workers, however, the Social Security Reform Commission is of the view that persons would require approximately 80 percent of their pre-retirement income in order to avoid a serious decline in their standard of living. ﾠ
Additionally, the insurable wage ceiling is set at $1,753 per month, Mr. Stewart noted, which excludes income above that level from being factored into national insurance benefits payments. ﾠﾠ
To help address some of these issues, the 15-member commission on Wednesday endorsed the 13 recommendations contained in the 7th NIB actuarial review. ﾠﾠﾠ
One of those recommendations calls for a review of the insurable wage ceiling.
“These adjustments should occur annually in line with wage and price indexes, as are commonplace in social security schemes in developed countries,” the actuarial review stated.
The review also suggested that the national insurance fund gradually increase the contribution period required to qualify for a retirement pension from three to 10 years, consider paying more than just the greater of a retirement benefit and a survivors benefit where the widowed spouse has earned his/her own pension, and ensure that the income test applied to non-contributory pensioners is strictly adhered to so that only those who are truly eligible receive assistance payments.
Mr. Stewart noted some of the challenges in securing adequate funding for the national insurance programme, particularly with a stagnant contribution rate.
“From the fund started in 1975 straight through to today there hasn’t been an increase in the contribution rate of 8.8 percent,” the chairman said.
“The expenditure rate of the fund, however, from 1975 has been increasing, and in the early 1990s the expenditure rate actually exceeded the contribution rate at one point.”
Since then the expenditure rate has fallen slightly below the contribution rate, but is now increasing once again, he said.
The Social Security Reform Commission will hold a number of meetings between August and October to garner input from the public on how to proceed with revamping the system.
Commission members will then take the month of November to compile their findings, before submitting a final report to the government in December.
Darrin Culmer, The Bahama Journal
