NASSAU, BAHAMAS — A governance reformer yesterday said that it is “critical” that decisive changes are made to protect the National Insurance fund and by extension the well-being of the country’s citizens and residents.
Hubert Edwards, head of the Organization for Responsible Governance (ORG) economic development committee, told Eyewitness News that recent statements by the Minister responsible for the National Insurance Board (NIB), Myles Laroda; Leader of Opposition, Michael Pintard; and the former Minister Shane Gibson on the need for an increase in contribution rate is indicative of the fact that a single option decision point has been reached.
“That decision point is to increase the contribution despite the Prime Minister’s obvious reluctance out of stated concerns that to do so at this time will result in added pressure on the back of taxpayers in the country. But as former Minister Gibson stated, at this stage there may be “no choice”, said Edwards.
“Based on the Minister’s statement, the fund is eroding its cash assets and reserves by at least $48M per year to meet monthly pension payments. When coupled with other obligations – social safety net claims – one gets the impression that this could be significantly more. Clearly, this is a troubling reality. The recent experience with the pandemic and financial crisis demonstrates how significant and important NIB is to the welfare of citizens, especially in times of crisis,” said Edwards.
He added: “The extreme loss of economic activities, pointing to the level of vulnerability of the economy, provided unequivocal insight into exactly what will go wrong where the country’s social security system and safety net mechanism is limited or weakened. Failure to effect the necessary reforms now, reforms which have been highlighted for many years, will ultimately work to the detriment of the taxpayers.
“The failure to take urgent action based on a number of actuarial assessments has put the fund at risk of eroding its cash and investment reserves. The reviews have consistently pointed to a near-term depletion of the fund. Against this backdrop, it is critical for the authorities to decisively make the changes necessary to protect the fund and by extension the wellbeing of citizens and residents.”
Edwards noted that in assessing and analyzing the solutions to the matter one should not dismiss the reluctance of Prime Minister Philip Davis in making what appears to be a straightforward and simple decision.
“While advocating for urgent changes it is important to ask why in the face of such overwhelming information there has been consistent delays,” said Edwards.
“This may point us to an inherent weakness in the design and governance of the fund in that it remains highly dependent on “external” decision making rather than being driven by a mechanism which allows for reasonable automatic adjustments, in response to prevailing adverse changes, economic or otherwise. I believe there were some legislative allowances proposed or made in this regard. To the extent that such allowances are in place and don’t work effectively then consideration should be given to revisiting same as a means of eliminating the extended delays and injecting discipline in the process. Properly structured and monitored, this will serve to ultimately protect the health of the fund.
He continued: “With shifts in demographics and more specifically that of the constituents of the NIB fund – pensioners living longer, comparatively more persons drawing on its resources, the ratio of pensioners to younger contributors changing – it’s critical that the requisite modifications are made to ensure that the NIB fund is well financed and remains well financed.
“While the impact on disposable income is similar in the first instance consideration should be given to an educational program which reminds persons that contributions are not tax. This should be done with a view of reducing adverse reactions to necessary future increases.”
