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National Insurance Fund in Critical Condition

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After the dust settled yesterday evening at the Lloyd Erskine Sandiford Sandiford Centre (LESC) Prime Minister Mia Mottley confirmed in flowery language what some in this medium and elsewhere have been alerting the public. The National Insurance Fund (NIF) on its current trajectory will be unable to honour its obligations to persons eligible for benefits from as early as 2034 – that is a short 12 years.

Briefing on the state of the NIS Fund (10 Aug 2022)

Was Prime Minister Mottley quoted in the press correctly that she was alerted to the danger faced by the NIS in June 2022 by actuary Derek Osborne? Surely the Prime Minister does not believe some of us are so gullible? That aside the blogmaster is pleased on the occasion of the availability of the 17th Actuarial Review of the National Insurance Fund, Unemployment Fund and Severance Fund as of December 31, 2020 it has finally been positioned on the front burner. 

17th-nis-acturarial-reviewDownload

A bone of contention has been the inability of the NIF to produced up to date financials. We learned yesterday during the press briefing at LESC the challenge is linked to reporting cash and accrual items and is being addressed by the NIS Board and Auditor General’s office. Again the promise of when current financials will be available is cloaked in non committal language. Although the NIS continues to struggle to produce current audited financials the prime minister’s message is correct, the structural problems afflicting the NIS looms large and must be the priority 1 concern.

The key takeaway from the briefing yesterday is that in a short 12 years the NIF will not be able to pay benefits to those eligible IF reform measures are not taken in the short term. With an ageing AND shrinking population there are limited corrective options available that will not be ‘painful’- add an underperforming economy to the mix and houston, we have a problem. 

Source: NIS

That it has taken so long to get to where we are today is bound up in politics but we are here now. Better late than never some say. Deputy chair of the NIS Board Rawdon Adams appears to have a grasp of the problem and seems earnest in his comments to move the matter along. We wish him and his Board of Directors well. The NIS is our rh life line.

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236 responses to “National Insurance Fund in Critical Condition”

  1. John A Avatar
    John A

    Well none of us could be surprised of what we have learnt. 2 years ago many here warned the fund was in serious trouble only to be called anti party and all doom and gloom etc etc.

    The most concerning figure to me is the January to April 2021 contributions at just over $160M. If you pro rate that for 2021 you are looking at $480 million roughly for the year. That would mean a substantial fall in receipts over the previous years.

    Truth is none of the medicine to fix the fund will be pleasant. You can push the retirement age higher, do away with early retirement, or increase the monthly dues from employer and employee. I suppose the fix will include some of these moves, but the reality is the fund needs a CASH injection from central government. It has been used as a piggy bank by them for years and now the pig needs topping up.

  2. Pachamama Avatar
    Pachamama

    David

    Get use to it. Neoliberalism long meant the end of these systems ……….. everywhere.

    These dated complaints are 40 years toooo late.

    Where were you when these epical battles were been fought. Cultural death is now unavoidable.

    Embrace the brave new world of Huxley!

  3. David Avatar
    David

    @Pacha

    The debate as long as humankind exist will be about transitioning from this to that.

  4. William Skinner Avatar
    William Skinner

    Political amnesia mixed with deception is a deadly cocktail.
    Soon clerical officers maybe on contract.
    Next maybe legislation to declare all citizens as self employed.
    All those who marched up and down have been put on contracts without consultation.
    New politics (DLP) or the Covenant of Hope. (BLP)
    Six and half dozen.
    For those who come here shouting about how lazy the youth are and how mendicancy is a national goal,
    please hit your key boards and inform
    about the youth and lazy working class and those who only want to be mendicants, how much they got out of the NIS funds . Let me tell you : not a single penny.
    For those who come here cussing the “ideologues “ please let us know how much they got out of the NIS funds: let me tell you : not a single penny.
    When talking about laziness and mendicancy just try to broaden your minds and you may find mendicancy and laziness in places you did not look.
    Perhaps you don’t know where to look. Maybe you are afraid to look or just too shame to look.
    Peace.

  5. Donna Avatar
    Donna

    David,

    That is COULD be unable by 2034, not will. That’s what I read. 2034 is the pessimist’s take or the lower limit.

    But we knew it was in trouble even before the pandemic, didn’t we? The raiding of the fund for questionable projects was highlighted repeatedly, wasn’t it?

    Still, this more deaths than births thing needs further information. Who exactly is dying? Is it the pensioners or the workers?

    What is our population expected to look like in the next decade? What is happening with our life expectancy? What were our excess deaths due to covid?

    I see now that they say they are going to consult us and ask us to prescribe our own medicine.

    Oh dear!

  6. David Avatar
    David

    Steuspe

  7. David Avatar
    David

    @Donna

    The blogmaster is going with what is trending and will not be swayed by the flowery language.

  8. David Avatar
    David

    @Donna

    It should be useful to retrieve some of Walter’s comments about the current state of the NIF.

  9. Donna Avatar
    Donna

    All adults through the generations call all youth lazy, forgeting how they themselves had to be “persuaded” to do their chores.

    If we are honest, hard work does not come naturally to most of us. We have to be “motivated”. Most of us learn over time or pick up the habit later, rather than sooner.

    I don’t cry down the youth.

    As for the general population, some will be lazy and others not. We should not place all in the same category.

    As for mendicancy? Don’t only look down, look up! They must be following the leaders, ent dat wuh yuh suppose tuh do?

  10. David Avatar
    David

    All of the pretty talk being leveled and predictions offered are based on a fired up economy. The blogmaster is not as confident as sone that the economy will take off in the near to medium.

  11. David Avatar
    David

    Donna we have had this conversation many times here and elsewhere, there is a price Barbados has been paying for growing a large middleclass. We have not made the adjustments in a situations that requires the leadership – public, private and NGO to be dynamic.

  12. Dullard Avatar
    Dullard

    The President says there is no crisis, right. Therefore there is no crisis. It is not like politicians ever tell any lies.

    “With an ageing AND shrinking population there are limited corrective options available”

    False!

    This obsession with population ageing is simplistic and misguided. The outsized impact of ageing on the fund is a function of the plan design being PAYG. Population ageing in and of itself is not the main or only cause for the crisis. This is an issue with any PAYG scheme in where support ratios are shrinking over time. Many countries in Europe and elsewhere have crossed this bridge before so there well known counter measures. The Dullard has even written about one or two.

    A switch to a different pension design or bringing other funding mechanisms alongside would help to mitigate the demographic effects on the scheme.

    It’s not rocket science.

    But my guess is that Bushie’s Brass Bowls will over complicate the issue and find a way to make it worse

  13. David Avatar
    David

    @Dullard

    You are questioning the assigned actuary to the NIF?

    When the last government and the incumbent floated the idea of a need to increase the population and by extension contributions to the fund what was your position? Also why is the US government and other developed countries been injecting cash to respective social security programs?

    As Pacha opined this is not a Barbados only problem.

    Enlighten us please!

  14. Dullard Avatar
    Dullard

    @ David

    I can question any actuary.

    Actuaries come to the Dullard for advice!

  15. David Avatar
    David

    @Dullard

    Give us 3 bullet points key next steps for the NIS?

  16. Donna Avatar
    Donna

    William,

    You are correct. Contracts have been slipped in all over government entities for some years now. Some of them are not even legal, a hybrid between contract of service and contract for services. No national insurance, no unemployment or sickness benefit, no severance if “retrenched”, full control of working hours etc and no payment of the balance of the contract if it is arbitrarily and ABRUPTLY broken by the hirer without justifiable cause.

    I know one person who works at a school who does not even get vacation pay.

  17. David Avatar
    David

    @Donna

    Terms and conditions will have to change for everyone. That is what happens in a dynamic environment.

  18. David Avatar
    David

    It is proven that many tasks can be performed more efficiently by private sector, we have started to see outsourcing at a higher level than years gone. What we must improve is the governance framework to ensure good integrity of transactions between the parties. That model of a government job for life will fade.

  19. Observing Avatar
    Observing

    It is a long read but worthwhile considering the 5-6 year discussion on BU about this and the policy direction of the current government. Let those who have ears to hear and common sense to use do so. Flowery language and catch phrases are good politics but rubber always has to hit the road at some point.

    On the eve of the restructuring, the NIS had about B$5 billion (50 percent of GDP) in reserves.
    Of these, central government securities accounted for B$3.6 billion (36 percent of GDP), almost exclusively in long term securities. The rate of return on both its government and noncentral government assets averaged about 7 percent, respectively, before the restructuring. In the debt restructuring, short-term and long-term claims on government were treated differently. The NIS’ (small) holdings of treasury bills were converted into the same 15-year

    instrument that was used to extend the maturity of commercial banks’ holdings of treasury bills, paying 1 percent interest for the first 3 years. Holdings of longer-term government debt were converted into a 25-year bond with a 37.5 percent nominal haircut (about B$1.3 billion), paying 4 percent for the first 3 years, and 8 percent thereafter. This implied an NPV loss for the NIS of 39 percent, using a discount rate of 7 percent (table 2). As a result of the debt restructuring, NIS liquidity decreased, and its reserves are expected to be depleted 10 years earlier than before the restructuring (see text chart). Before the restructuring, asset cashflows were projected to exceed liability cashflows until 2031-32. At this point, the NIS would have sold reserves to pay for current expenditures and reserves were projected to exhaust in 2052-53. After the debt restructuring, asset cash flows are reduced
    between 2019-22. The operating balance is expected to become negative around 2027-28, or about 5 years earlier than had been projected prior to the debt restructuring. Lower investment income and the BRB$1.3 billion upfront haircut (13 percent of GDP, or 26 percent of the NIS’ reserves) result in reserves being expected to be exhausted around 2040-41, 10 years earlier than expected prior to the debt restructuring. Systemic or parametric pension reform is envisaged in the medium term to strengthen the financial position of the NIS.

    Ref: IMF Working Paper, Prepared by Myrvin Anthony, Gregorio Impavido, and Bert van Selm, Feb 2020,

  20. Observing Avatar
    Observing

    And clearly the birdies were whistling long before yesterday.

    https://barbadostoday.bb/2022/01/07/national-insurance-finances-could-be-gone-in-two-decades/

    Just observing

  21. David Avatar
    David

    @Observing

    You must of heard Derek Osborne dismissed the one billion that was burnt by the 2018 debt restructure? He said it was a net wash because the taxpayers were no longer saddled with the repay.

  22. David Clarke Avatar
    David Clarke

    The Nis has been used by both Government as a cash cow to support those in power.
    The millions of $ that the Nis had to write off is criminal.
    You need a Nis board that is free of Gov’t. Interference. Financials will never be reported or accurate.
    The people and companies cannot be taxed no more hence the pension fund will DIE.

  23. Observing Avatar
    Observing

    @David
    “net wash – for the most part” sounds like a buzz word.

    Osbourne must be a politician.

    Just observing

  24. David Avatar
    David

    There has been discussion here and elsewhere if too fleeting that the NIS and Central Bank should be ring fenced to ensure independent decision making.

  25. John A Avatar
    John A

    NET WASH sound real nice but guess what, it also means the cashflow into the NIS of the debt owed will not occur. It also means that the $1 billion dollar injection sadly needed by the fund will never take place. That is what happens when the MOF has the final word on the purse strings of the NIS. In the end all the fancy bonds and NET WASHES mean little when what is needed badly here is COLD HARD CASH.

  26. African Online Publishing Copyright ⓒ 2022. All Rights Reserved Avatar
    African Online Publishing Copyright ⓒ 2022. All Rights Reserved

    Chickens are home and roosting.

  27. John Avatar
    John

    What seems to be missing is how much the GOB has removed from the Scheme.

    Maybe we should know how much in bonds the GOB has given the Scheme as security.

  28. Pachamama Avatar
    Pachamama

    Waru

    When these fears were being raised nobody cared.

    Within the historical moment when Trotman, a man who’d suffered from Napoleonism, was more interested in political theatre,, becoming the lackey prime minister for corporate interests, than workers’ ownership rights. His successor is no better.

    Now, there’s only one fix.

  29. African Online Publishing Copyright ⓒ 2022. All Rights Reserved Avatar
    African Online Publishing Copyright ⓒ 2022. All Rights Reserved

    “When these fears were being raised nobody cared.”

    i remembered vividly how much lip their supporters/fowls had for us when we posted constantly about the trap they set for themselves…

    They made their beds….they can run around trying all the fixes that will never work cause they are so clueless and “appallingly ignorant” …….too well schooled..

    the people now have to make their moves and leave them in the trap they so skillfully created…..

  30. William Skinner Avatar
    William Skinner

    It’s extremely amazing if not pathetic that we have educated people who fall for cliches and sound bites.
    When a country is reduced to nothing but tennis scores and those who try to engage in serious national discourse are scorned, vilified and marginalized , in order to give glee to others , this is what happens.
    We have to laugh. The taxpayers were saddled with paying a man for at least six months, to do a job he was given by the PM. The man quit and not a single word as to why .
    In the mean time the same man is calling for transparency and accountability. Yuh mean to tell muh dat after I pay yuh , yuh en even got to tell me why yuh lef’ de job.
    And the silliness continues.
    Blame the lazy youth , the mendicants and the ideologues fuh dat too.
    I never learnt how to steups.
    Ain’t even sure I know how to spell it.
    Peace

    And the silly games

  31. David Avatar
    David

    @Pacha

    You laying blame on Trottie? One must ask why.

  32. Donna Avatar
    Donna

    David,

    Terms and conditions have to change for everyone?????

    This is how you dismiss unlawful behaviour by government????????

    Hybrid contracts are not a thing under our laws!

  33. African Online Publishing Copyright ⓒ 2022. All Rights Reserved Avatar
    African Online Publishing Copyright ⓒ 2022. All Rights Reserved

    “When a country is reduced to nothing but tennis scores and those who try to engage in serious national discourse are scorned, vilified and marginalized , in order to give glee to others , this is what happens.”

    how can we forget the treatment we received by the schooled…….somehow these days they are more looking like the UNSCHOOLED and UNEDUCATED…

    i see them spellling it stepsssss…don’t know what’s going on there…

  34. David Avatar
    David

    @Donna

    Not for all, some jobs will have to change.

  35. Enuff Avatar
    Enuff

    Two-moutism in full effect. Lemme sit back and read the pension experts pon BU.☕️

  36. Pachamama Avatar
    Pachamama

    David

    No. He’s just an example of a man who was there, should have known better and failed miserably while using workers to seek a political heaven.

    All uh his ilk should have been beheaded! This lot tooooooo[o[ooooo!

  37. African Online Publishing Copyright ⓒ 2022. All Rights Reserved Avatar
    African Online Publishing Copyright ⓒ 2022. All Rights Reserved

    Don’t have to be any pension expert to understand the definition of FACILITATING TIEFING and SCAMS against the pension fund…that got them in this special place where they are SCRAMBLING re the RUNNING DEFICIT…..in the BILLIONS of dollars…….

  38. David Avatar
    David

    @enuff

    Is being NOT an expert the issue?

    Isn’t it the experts that have in the main landed us here?

  39. Crusoe Avatar
    Crusoe

    @David Clarke

    Exactly. Consecutive governments using the fund as an unofficial development bank is a big part ofvthe issue.

    On the investment portfolio, how can a 69% government holdings have made any sense? Little diversification.

    The real problem is that the government finances have been unsustainable for a long time.

    As for the debt write off, it is not rrally relevant because the invedtments were essentially uncollectible.

    On actions to save the fund?

    Move compulsory retirement to 70years.

    Increase contributions by 1% employee and employer each.

    Cut benefits by 5%.

    Do not increase investments in government bonds but in energy and other real earning investments.

    Otherwise, it will not improve.

  40. John Avatar
    John

    JohnAugust 11, 2022 8:43 AM

    What seems to be missing is how much the GOB has removed from the Scheme.

    Maybe we should know how much in bonds the GOB has given the Scheme as security.

    ++++++++++++++++++++++++++++++++++++++++++++++++

    How much money did the NIS invest in CLICO, Harlequin, Four Seasons, Apes Hill etc etc?

  41. David Avatar
    David

    @Crusoe

    The challenge is that returns on government securities give the best yield especially in a low returns investment market of recent years.

  42. Crusoe Avatar
    Crusoe

    Some of the land that John ssys government owns in St.Andrew can be vested in NIS, to repay lost investment money.

    Ensure it is in a trust such that it cannot be sold nor leased for periods longer than five years.

    NIS can lease lots to small farmers for food production, at reasonable rents.

    Government can also vest beach access / beachfront land under similar terms, to NIS. NIS sets up pay parking to ensure a steady income stream.

  43. Crusoe Avatar
    Crusoe

    David,
    .
    Do paper returns mean anything if the cash is unavailable?

    Surely the energy sector and others earn a decent return?

    Why else would Emera fall over themselves to invest?

  44. Crusoe Avatar
    Crusoe

    John,

    Of course. The very reason that the government is duty bound to repay, by vesting land assets capable of earning a steady income stream, into the NIS.

    What about Four Seasons, who owns it? Government?

    Whatever share the Govt owns should pass to NIS.

    Nuh mock sport now. Lewwe see.

  45. African Online Publishing Copyright ⓒ 2022. All Rights Reserved Avatar
    African Online Publishing Copyright ⓒ 2022. All Rights Reserved

    Dreaming is really nice Crusoe……but what about the historical corruption, stealing and bribery….you made absolutely no accommodation for that….part and parcel of what the Don told the court….”dah is how we duz do business in Barbados”….

  46. Hants Avatar
    Hants

    Fuh true ?

    “Barbados’ $4 billion National Insurance Scheme (NIS) is at risk of being depleted in as few as 12 years, ripping the social security safety net from under Barbadian workers.”

  47. Bush Tea Avatar
    Bush Tea

    This is EXACTLY like the captain of the Titanic calling a meeting just before the last lifeboat cut loose, asking for ideas from those left on board, of what ‘options are available’….
    Lotta shiite!!!

    The NIS was DOOMED when we allowed idiots of the ilk of the ‘Moron from Moontown’ and Stinkliar to dictate its investment policy..
    Then we handed it over to the ‘geniuses’ from Four Seasons and Clearwater…

    If a FOOL and HIS money is so easily parted, what the HELL did wunna think would be the case of a Bunch of FOOLS and OUR money…

    Steupssss
    Fortunately it don’t really matter, cause the broke NIS will be one of the LEAST of our problems quite shortly….

  48. Vons Avatar
    Vons

    Has anyone realize that the only contributors to NIS are non- government companies & self employed? The GOB do not pay in a cent for their workers, that is why when they are sick they cannot receive benefits. All the money that the GOB has taken from the fund needs to be repaid in cash or gold. Legislation needs to be passed to stop The GOB from accessing funds with immediate effect. The GOB paper that NIS holding needs to be replaced with cash.
    Are any lawyers in de house who can say if the private citizens of Barbados can file a class action law suite againat the GOB for our money that they have not repaid?

    It is like placing your money in safe keeping and someone else borrows and never returns, then you will have to take to court both parties to recover your monies.

  49. Wily Coyote Avatar
    Wily Coyote

    Willy does not understand how a 2034 DATE can be proclaimed without up to date audits, hummmmm. Before the SUPREME LEADER makes any declaration’s she needs to get her FACTS correct and UP TO DATE. Without ACCURATE FINANCIALS is “ALL TALK & SPECULATION”. Previous speculation on this blog about governments use of the NIS funds as general revenue, less then reliable investment structure in GOVERNMENT toilet paper etc. etc. makes the outlook extremely poor.

  50. African Online Publishing Copyright ⓒ 2022. All Rights Reserved Avatar
    African Online Publishing Copyright ⓒ 2022. All Rights Reserved

    A real, real expensive wipe. John might be the first person to test out that toilet paper J Series..

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