Introduction
The National Insurance Service (NIS) of Saint Vincent and the Grenadines was established in 1987 as a replacement to the National Provident Fund (NPF) that was designed to offer some forms of social protection to citizens of Saint Vincent and the Grenadines. The structured benefits that were provided by the NPF were old age benefit, death benefit to named beneficiaries and a permanent incapacitation benefit. The benefits of the NPF were deemed to be inadequate and by 1982 it was recommended that the NPF be replaced by a more comprehensive social insurance service that provided for all employees in Saint Vincent and the Grenadines.
It is noteworthy that the total cumulative contribution to the NPF back in the 1970s and 80s was 10%, the significance of this will eventually be realised through the discussion in the weeks article. The history of the NIS shows that over the years since its establishment, it has consistently conducted reviews of the operation, called actuarial review (the first of which was conducted in 1992) to determine the status of the Fund and present its findings. By 2001, the NIS had conducted its 5th Actuarial Review and it found that the Fund was sound, but also concluded that the contribution rate of 6% was adequate to finance the NIS operations until 2016. Nothing about the actuarial reviews is strange, they are necessary for the NIS to determine its “health” and plan with necessary reforms undertaken to ensure the viability of the Fund for years to come.
Necessary Reforms to Strengthen the NIS
The discussion on pension reform is one that has overtaken countries across the globe as circumstances impacting the working and retired populations continue to change. These changes in the population demographic have serious consequences on the medium- and long-term viability of social security/protection funds that can lead to Fund depletion if necessary and desirable reforms are not enacted. Across our region, it was revealed within recent years that many of our neighbors will see a depletion of their NIS fund within 6-10 years and they have moved to enact reforms to stabilize the Fund. In Europe, France recently moved to increase their retirement age as part of the reform necessary to protect the fund’s viability, even in the face of massive protest, because the reforms are necessary.
Here in SVG, our NIS which is among the best managed in the region and the world, remains the best option for working class Vincentians to secure their retirement. The need for reform, stems from at least 3 challenges that are structural in nature that will create severe financial and actuarial sustainability challenges to the Fund if not addressed.
Firstly, the NIS was generously designed, both in the low levels of employee contribution and the generosity of the benefits paid out at retirement. At this point, the relevance of the 10% of the NPF contribution is relevant, since comparatively, the NIS had a lower contribution of 6% (2001 Actuarial Review), until it was increased much later to 8% of which the employee pays 3.5% and the employer pays 4.5%. Even with this low contribution rate, employees can get as much as 60% of their income on retirement and similar percentages exist for payment of sick and maternity benefits. In 2021 for example, the total contribution was approximately $68.2M, compared to the total benefits paid out that was $82.2M, showing the benefits outweighing the contributions by about $14 M. The generous design of the NIS regarding the rate of contribution in relation to benefits remains one of the standout structural issues of the Fund.
Secondly, the NIS faces a demographic situation of a high scheme dependence ratio, meaning, the number of retired persons who are receiving a pension from the NIS, is growing faster than the population of individuals working and currently contributing to the NIS. Currently. There are about 40,200 registered employees (down from 43,095) with the NIS, that constitute the contributing population versus approximately 9800 pensioners (up from 9300) who receive benefits from the NIS, showing the growth trend in the retiring population.
Finally, the population ageing phenomenon: increasing longevity (people living longer), declining fertility and increasing migration of Vincentians at working age who go abroad for any number of reasons, all contribute to the financial and actuarial sustainability challenges that are facing the NIS, if the necessary reforms are not undertaken
NIS is Still the Best Option
Even with the challenges, the NIS remains the best option available to the working class to invest in for their retirement. While it is clear that some among us are intent on undermining the confidence of workers in the security that the NIS offers for their retirement and other social protection benefits, the records will show that the company is well managed and is on solid footing. What is being proposed is a number of possible options that can reform the NIS to make it sustainable for the medium and long term. These reform options include raising the retirement age as some countries in the region and in Europe have done, including Barbados and France, increasing the rate of contribution by employees and employers, or a mixture of the two. The NIS recently held a very successful consultation session addressed by experts in various fields to inform Vincentians of the situation of the institution and lay out clearly the options and how they will impact the long-term viability of the NIS.
The lies of the opposition and their spokespersons creating mischief about “NIS money” reflects their inability to engage maturely on issues of national concern, resorting instead to lies and misinformation. This government takes the wellbeing of our citizens seriously and has a track record of being worker friendly and caring for the elderly among us, including pensioners. This ULP administration will work with the NIS to institute sensible reforms to strengthen the social protection program and make the NIS stronger than it has ever been.
