NIB questions

The Ninth Actuarial Review warned that from 2019-2020, assets will rapidly decrease and the NIS funds will be completely depleted in 2029-2030 if nothing is modified in terms of contributions or benefits.

Interestingly, according to the 8th Actuarial Review, NIS assets would have increased until 2027-28 and would have then started to decrease.

It was projected that the fund would be depleted in financial year 2039-40.

Therefore, it would appear that in the three years between the Eighth and Ninth Actuarial Reviews, the rate of depletion of the funds increased by ten years. Would this mean that, if no changes are made, we can assume by the Tenth Actuarial Review, the projected depletion would be in 2019? The obvious next question is – how did we reach to this point? There are people who are making statements that the public should not panic - assurances are being given to the public that the NIB is wellmanaged, well-governed, transparent and accountable. There is much evidence to suggest otherwise, and citizens who are currently making NIS contributions, and who may not be able to receive any benefits, must demand some answers. We need to evaluate the NIB based on competence of the Board, as well as the operational efficiency and the financial health of the institution.

Actuarial reviews would have had to be undertaken over the life of the establishment and is an instrument that is intended to allow the government to understand the financial state of the NIB and is a fundamental tool in ensuring the financial sustainability of the scheme. The actuaries have made recommendations after each of the nine reviews. Have these recommendations been adopted by the NIB? Has the government been made aware of these recommendations and the implications of not implementing them? Would the government have been willing to raise contributions to the NIS as would have been necessary to ensure the viability of the fund if it threatened a loss of votes? According to the actuaries, it would be necessary to implement a mechanism that would force the adjustment of the contribution rate at regular intervals. However, the scheme’s adjustments are conditional on the willingness of the government to pass the law to introduce those changes.

What about the operational efficiency of the NIB? Does the NIB receive contributions for 100% of the employer population? If not why not? The record management is critical for an institution such as the NIB. Is it efficient? Is there a competent record system? Are the records of the contributions available and accurate? How many citizens either at retirement or even earlier have to battle with NIB over the number of contributions made? It stands to reason if the records of the contributions are inaccurate then the benefits will be inaccurate and funds available for investment will be inaccurate; how then is the investment portfolio being effectively managed?.

The next area for discussion is the financial health of the institution and with that investment decisions that the NIB would make. We need to ask then about the NIB spending $37 million to acquire the property housing Apsara and Thamnak Thai restaurants in Port-of-Spain and promptly leasing it back to the owners at $96,000 a month for ten years. Interestingly, the property was valued at $16.5 million. In addition, $5 million was spent on repairs to the building. We must also inquire as to whether the financial performance of the company is reported to the Minister of Finance? What about any shortfall in benefits versus contributions received? Who pays the difference? Is it the NIB or the government? If it is the NIB and there are no more funds, can the government afford to fund a deficit? Finally, according to the Fit and Proper Guideline issued by the Central Bank, the Board of Directors must consider character, competence and financial soundness when assessing key personnel for employment within the organisation.

But what does the Central Bank mean by competence? According to the Guideline a person must demonstrate the competence and ability to understand the technical requirements of the business, the inherent risks therein, and the management processes required to conduct its operations effectively.

The technical requirements of the NIB would therefore include an understanding of business, finance, investments and other aspects of managing a national social security scheme. Is a background in law then, considered sufficient to steer a billion-dollar financial institution that citizens depend heavily on? What is the Minister doing to address all the deficiencies at the NIB that are becoming ever more apparent? Where are the Board in all of this? Certainly, they must be aware that all failures of the institution will ultimately be theirs.