Many countries which have attempted such radical changes have experienced violent protests and extended social dislocation, so the NIB is moving very cautiously, with consideration that the plan would, in effect, require employed persons to work longer than they expected before qualifying for a pension.
The retirement age stated in the legislation establishing the National Insurance System (NIS) is 65. However, according to the National Insurance Act, the retirement age is 65, or 60 years if the person ceases to be in insurable employment at age 60. At that point the applicant might receive a retirement pension or a retirement grant. In the public service, the mandatory age of retirement is 60 or there is the option of early retirement with full benefits if the employee has completed 33 1/3 years unbroken service before the age of 60.
The NIB’s Ninth Acturial Review, which assessed the NIS between 2010 and 2013, observed that the country is facing an ageing population syndrome, defined by the United Nations as a situation in which more than ten percent of the population is over 60 years old. At present, 14 percent of Trinidad and Tobago’s population is over the age of 60. The actuaries project that by 2025 that percentage will rise to 17 percent of the population, and to 20 percent by 2050.
In a recent interview with Business Day, the NIB’s Executive Director, Niala Persad-Poliah, said that with this statistic, combined with low fertility rates and the possibility of migration, “what we have happening is less persons coming into the system or contribution income coming into the system and more benefits being paid out, so naturally there must be reform of the NIS to ensure that it is sustained for generations to come.”
Some of the recommendations coming out of the Ninth Acturial Review, the latest review of the system, include that the NIB considers increasing the rate of contributions as well as increasing the maximum insurable earnings.
Choosing her words carefully, Persad-Poliah said another recommendation was that the NIB should “begin the discussion on moving the retirement age.” Since the review was laid in Parliament last November, she said the NIB had begun “extensive” stakeholder consultations, involving government, business and labour. She said, “national dialogue and extensive stakeholder consultation is required for any long term changes to the National Insurance Act.” In the meantime, the NIB has implemented some of the short term recommendations made by the actuaries: from July 4, 2016 the board will increase the contribution rate from 12 percent to 13.2 percent and maximum insurable earnings will rise from $12,000 to $13,600. These measures will extend the life of the NIS fund by about six years. Persad-Poliah said, “If there is no reform to the system whatsoever, naturally benefits will begin to exceed income. To mitigate against that, reform is required.”
The NIB Executive Director said raising the retirement age is a sensitive issue and because of this the Ninth Acturial Review suggested that it be raised slowly to 65 years of age (the current legal retirement age) over a period of 25 years. “
Persad-Poliah stressed that this was only one of many recommendations made in the Ninth Acturial Review which the NIB is considering. She said because there were so many reforms proposed by the actuaries, the board of the NIB was carefully considering the best mix of reforms. “It might very well be that we don’t touch the retirement age at all - so the discussions will commence but there will be no overnight changes to the system, it is but a discussion or a recommendation at this time and we are looking at the other things.”
She pointed out that several islands in the region had already gone ahead and moved up their retirement age because they are facing the same syndrome of ageing populations as Trinidad and Tobago. She cited Barbados as one example where the retirement age had been moved from 65 years to 67. She said she believed that St Vincent would shortly follow Barbados’ lead although she was not sure what the Vincentians were considering as their new retirement age.
Persad-Poliah explained that in TT, if a person goes back to work after they begin receiving their retirement pension, contributions to the NIS are only made by the employer and the worker is only covered for employment injury. In addition, once a worker passes the age of 65, the employer is expected to stop making deductions from their salary and from then on only the employer makes payments to the NIB in a class which provides coverage to the worker for employment injuries only.
She noted, “Right now we pay out approximately $4.3 billion in benefits annually and (the) contribution income is now being compromised by the ageing population because at 60 people stop contributing to the fund and they get a retirement pension; its being compromised by low fertility rates because right now we have approximately four persons contributing to the payment of one pensioner, but by 2050 that is going to flip and I am going to have a one-to-one ratio with one person contributing to the payment of one pensioner and that speaks to the outflows of benefits... and now we have the economic decline.”
She added that the problems for the NIS have been compounded by the recent layoffs of large numbers of workers which meant that they would not be contributing to the NIS. “So what we have to do, there must be strong management, there must be prudent investment. We have to sustain the payment of benefits for generations to come.”
Persad-Poliah assured, however, that the NIB is cognizant that any changes made to the NIS would have a social and economic impact on the country at large.
In a recent interview, Dr Godfrey St Bernard, Head Demographer at the Sir Arthur Lewis Institute of Social and Economic Studies (SALISES) at the St Augustine Campus of The University of the West Indies, confirmed that fertility rates in Trinidad and Tobago and across the world are declining. He added that in Trinidad and Tobago and several Caribbean countries fertility rates are below replacement level. “Replacement level fertility is a country having a total fertility rate (TFR) of 2.1 live births per woman and in Trinidad and Tobago the total fertility rate is somewhere between 1.6 and 1.8 and that is a trend that I don’t think we will see changing in the near future.”
He said when he wrote the Common Entrance Examination in 1970, there were well over 30,000 children doing the exam but today there are just about 18,000 children sitting the SEA exam, “and I think that is sufficiently appropriate an indicator to suggest that there have been declines in fertility levels across time.”
He said this trend had a number of “frightening implications” for countries like Trinidad and Tobago. Dr St Bernard said the current population of Trinidad and Tobago is likely at its highest right now, adding that he has done projections which suggest that the country’s population could decline to one million with a larger proportion of that one million being older persons. He said that while there has been a lot of discussion about economics, “nobody is paying attention to population dynamics and the economics would not make sense if you do not have the people to generate the revenues and that sort of thing. Who will generate the revenues? Because if you are having smaller and smaller cohorts emerging as populations likely to enter the labour force at some point in time we will have to consider that if we can’t fill the labour force based on our domestic supply of labour, we have to get labour from somewhere.”
NIB “Pension Ready”
Responding to complaints about the delays some¬times experienced by beneficiaries in having their pensions paid and claims honoured, NIB’s Executive Director, Niala Persad-Poliah said that by June last year, the NIS had more than 150,000 beneficiaries with 90,000 of them being long term beneficiaries who are either getting a retirement pension or an in¬validity or survivor’s benefit. She said the system pays these persons “seamlessly” each month but at any time at least ten percent of its beneficiaries would be aggrieved by the decisions made by the board or be unhappy at the length of time taken to process claims or angry at the amount of money they receive from a claim. “And, of course, that ten percent is the loudest. Those voices are the loudest.” She added that part of the problem was that the NIB, which began operations in 1972, had been a largely paper-based organisation with few IT solutions and this would account for the lengthy processing of claims. However, she said that from last year, the NIB began many initiatives aimed at reducing the time it takes to process applications.
Among the efforts made by the National Insurance Board to speed up the processing of claims and the payment of benefits to those entitled to receive them, is the launch of the “Pension Ready” programme, under which persons covered under the NIS are invited to visit the board’s offices when they cross 55 years of age to get their records in order before they reached 60 so that the board could deal with any discrepancies before the person reaches retirement age, facilitating the speedy payment of benefits.
Persad-Poliah said that since 2015 the NIB had also asked people to apply for their contribution statements online using the online contribution request form. The NIB promises that those who make such requests will receive their statement within three working days. She said persons who receive these statements are advised to check them and if mistakes or errors are found visit the NIB with all the relevant documents to sort out any discrepancies. She said since August last year the board had also launched a facility allowing employers to make their payments online to avoid having to form long lines at NIB offices at month end. She added that because of these new initiatives launched over the last year she was satisfied that the processing times for applications will soon be significantly reduced.
NIB officials said that claims processing times are shorter in Trinidad and Tobago than elsewhere in the Caribbean and the complaints are largely from the “informal” employment sector where the payment of contributions were not as consistent as in the more formal sectors. They said when persons employed in the “informal” sector made a claim the board then had to go out and investigate whether the required contributions had been made and this investigation caused delays to the processing of their claim. The NIB said that 90 percent of its beneficiaries, coming from the “formal” sector, get their benefits in a very short time.