Latest update April 23rd, 2024 12:59 AM
Apr 04, 2012 Editorial
Last week, Secretary to the Cabinet, Dr. Roger Luncheon, announced that the NIS as it presently stands would become unviable unless it simultaneously increased its revenues while ‘controlling” expenditures. If he were the chairman of a private enterprise corporation, we would have to say that he was presiding over an entity that was either already eating into its reserves or was soon to do so. Not a healthy position to be in any circumstance.
As one of the measures to increase revenues, Dr Luncheon mentioned the possibility of increasing the contributory rate (split between the employer and the employee) from the present 13%. He admitted, however, that this would simultaneously reduce the take home income of employees and the profitability of businesses. To reduce expenditure, the NIS chairman also mentioned that another intervention could be to raise the age at which pensions can be acquired: from the present 60 years to “65 or even 67 years”.
Coming just before the budget that was billed as a ‘people’s budget’, if these measures are implemented, it will be a terrible blow to the older and most vulnerable members of our society. Right now, the two largest blocs of workers – public service workers and sugar workers – retire around 55 years: the former by fiat and the latter because of their broken bodies. After making their contributions for over thirty years in some instances, what are they to survive on between 55 and 67? The life expectancy at birth in now 69 years, so we guess Dr Luncheon figures that the NIS might be able to get by, by paying pensions to qualified pensioners for two years.
But what makes Dr Luncheon’s statements even more outrageous is that more than four years ago, a NIS Reform Committee submitted a report to him which analysed the status of the scheme and made a raft of recommendations for addressing the identified problems. The Committee’s report stated bluntly that “in about five years (i.e. by 2012) expenditure would begin to exceed total income”. Prophetic? As for Dr Luncheon’s blithe assertion that the NIS has reserves of $30billion, the report predicted, “in 2013 the reserves would begin decreasing and be depleted by 2022.”
The question is, what has Dr. Luncheon and his Board been doing since 2007?
Let us take the income of the NIS which comes from contributions and investments. The Committee made several recommendations for increasing contributions – but not by raising the contribution rate. This is the quick and dirty method which will place the burden squarely on the backs of the workers that are in the organised sector. Have at least half of the self-employed been brought into the NIS system? If not, why has the goal not been reached? Has the NIS put in place measures to ensure that all licenced contractors are monitored to make sure their contributions are made? What about the legions in the interior mining gold? What about taxi drivers?
Then there are the investments. Is there an Investment Management Committee as recommended? Has the investment portfolio been diversified away in the manner recommended to deliver the recommended rate of return? Has Dr Luncheon been delivering regular reports in this area?
Dr Luncheon mentioned that the NIS has recently acquired the CLICO building. Has this investment been delivering a positive cash flow? Then, of course, there is the $5.7 billion that the NIS invested in CLICO – are we going to be recovering this amount? Have the recommendations in the financial reporting systems (both substantively and in its computerisation) been implemented? Have the auditing services been put up for tender on a ‘rotating basis”?
In our estimation, the NIS is too important an institution to be left on ‘auto pilot’ as it appears to be right now. Before going forward, we demand that Dr Luncheon gives a report of actions taken to implement the NIS Reform report of 2007. The government cannot give with the right hand (Dr Singh) and then take a larger portion with the left hand (Dr Luncheon).
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