by Linda Straker
- NIS is a “defined-benefit, pay-as-you-go” system
- 2009 actuarial review forecasted reserve would be completely depleted by 2042
- Government must amend relevant section(s) in the NIS legislation
The National Insurance Scheme (NIS) has explained that receiving fewer contributions than it can pay out during a period is a normal occurrence in all social security systems which are designed like the one in Grenada – that is, a “defined-benefit, pay-as-you-go” system.
“These social security systems build up reserves in the initial years, and the income derived from the investment of the reserves is used to assist in financing it as they mature,” said a posting on the scheme’s Facebook page on Monday, 27 August.
On 22 August a post on the page said that it had received less contribution for the first 6 months of 2018 compared to what it has paid out. “For January to June 2018, the NIS paid $42.05 million in benefits and collected $39.9 million in contributions. This means that contributions collected for the period were not enough to cover the benefits paid during the period. The difference is covered by the returns earned on the monies invested over the years.”
Providing some clarity on the matter which has become a topic of current discussion, the NIS disclosed in its 27 August posting that in 2017 it earned $32 million from its investments. This amount, together with contribution collected of $73.3 million brought the total revenue of the NIS for the year to $105 million. “For the same period, the benefits paid amounted to $75.5 million while general and administrative expenses totalled $8.4 million. Therefore, total expenditure amounted to $83.9 million. NIS Grenada, therefore, had an operating surplus in excess of $20 million for 2017. Further, the National Insurance Fund at the end of 2017 held assets of $970 million,” said the post which confirmed that the Government of Grenada is not in arrears and has paid millions in contribution for 2017.
“The other concern expressed which we wish to clarify is the payment of government contributions. Government is not in arrears in the payment of its contributions to the NIS. In 2017 government paid $19.9 million in contribution to the NIS on behalf of its employees. All contributions due and other financial commitments, such as payment of interest due on rent, bonds and treasury bills are fully met in a timely manner for 2018,” the post said.
For January to June 2018, active insured persons that is, persons who made at least 1 contribution payment in the period, totalled 40,677 while 9,210 persons are currently receiving a pension from the NIS monthly. For the first half of this year, 549 new pensioners were added to the pension payroll.
Without directly calling on government to implement recommendations from previous actuarial reports, the NIS said that it is necessary to make adjustments to the system as time passes by to ensure their continued sustainability.
For the NIS to legally implement any change to its operational systems, government must make the necessary changes by amending the relevant section(s) in the NIS legislation.
The 2009 actuarial review forecasted that expenditures would exceed contributions by 2017 and forecasted that expenditures would exceed total income by 2029. The review also said that operational deficit would continue to increase after 2029 and the reserve would be completely depleted by 2042.
The main recommendations of the actuarial review were to:
- Increase the retirement age from 60 to 65
- increase the contribution rates to 11% (5% employee + 6% employer) from the current rate of 9% (4% employee + 5% employer) and
- increase the insurable limit gradually given that current limits were very small for high-income brackets.
Contributions are based on a maximum insurance limit of $3,000.