From today, members of the public will have to pay increased national insurance contributions.
However, the National Insurance Board (NIB) says it is justified in increasing its contribution rates because benefits payments, which include the $3,000 a month minimum pension, were being partly funded by the scheme’s investment earnings instead of from contributions.
According to the NIB’s website, effective today, national insurance contributions will be increased from 12 per cent of insurable earnings to 13.2 per cent of insurable earnings. The maximum insurable earnings covered will also be increased from $12,000 to $13,600 per month.
In a statement to the T&T Guardian yesterday, NIB said: “The NIB’s decision to increase the contribution rates and the maximum insurable earnings was in keeping with the conclusions of the 9th Actuarial Review, which recommended a robust mix of short-term and long-term reform measures to fortify the strength of the national insurance fund in coming decades. It was also one of the best short-term measures to adopt to ensure fund sustainability.”
An actuarial review, according to the NIB, is conducted in five-year intervals or less and combined with projections, it assesses the ratio of benefits to contribution income and pronounces on the long-term financial condition of the fund.
Dated June 2015, but with information as at June 2013, the 9th Actuarial Review, which the NIB is using to justify increasing contribution rates, states: “From 2019-20, assets will rapidly decrease and the NIS funds will be completely depleted in 2029-30, if nothing is modified in terms of contributions or benefits.”
However, NIB assured yesterday that “increasing the contribution rate and the maximum insurable earnings will safeguard the National Insurance System, improve fund stability and preserve the NIS fund, as the NIB continues to put measures in place to ensure that the organisation remains solvent and viable now and in the future. The increased maximum insurable earnings will also result in greater protection for employees in the long-term, since a greater proportion of their income will be insured.”
On the issue of the premium contribution, NIB said the current 12 per cent cannot stay. In the 9th Actuarial Review, NIB said: “The general average premium of the system (the constant contribution rate necessary to finance all NIS benefits over the next 50 years) is 23.8 per cent.
“What is clear, is that the financial situation of the scheme ‘has significantly deteriorated’ since the last report was done, due to the recession and therefore, 'action must be taken' to restore its financial health.”
It added, “The present contribution rate of 12.0 per cent is not sufficient to support the present level of benefits in the long run. It is not even sufficient to meet current benefit expenditures, which represent 13.8 per cent of the payroll in 2013-14. Investment earnings have to be used presently to support the expenditures of the system.”