The blogmaster read the Barbados Today Editorial (4 July 2024) with interest. It raised concerns about matters the Barbados Underground family has been debating over the years.
Actuary and talk show host Walter Blackman has repeated many times the best approach to “achieving retirement security consists of a pension, Social Security, and individual savings. Your pension helps you to maintain your standard of living in retirement, and savings provides important supplemental income for unforeseen expenses” – see The Importance of Your Pension.
The news originating from Financial Stability Report 2023 should be of concern to government and citizens.
Pension coverage continued to decline as wind-ups outpaced new registrants over the past five years.
The sector is comprised 245 occupational pension plans, of which 58 percent are defined-contribution (DC), 32 percent are defined-benefit (DB), and 10 percent are hybrid (DB+DC combined) pension plans. Since 2019, 39 pension plans within the sector have wound-up, primarily originating from within the financial, services, tourism, and sales/distributions sectors. While the sector has experienced eight wind-ups over the past year, the global slowdown will likely impact these economic sectors and threaten the viability of occupational pension plans. The sector’s size relative to the economy stood at 22.1 percent at year-end compared to 24.1 percent in the prior year.
The news that 39 occupational pension plans were wound up because of financial challenges by employers is a concern not just because Barbados is labelled an ageing population. A reminder: good planning for retirement, especially for middleclass citizens, depends on public and private pension income supplemented with personal savings to bridge the fall off in salary income at retirement. This is important in a Barbados context which is a high cost of living country and elderly care support is virtually non existent.
It gets worse.
Barbadians were encouraged in the 80s and 90s to plan for retirement, many did by investing in Registered Retirement Savings Plans (RRSPs), Savings Bonds, Debentures and domestic government securities. After the country started to experience economic difficulty, incentives to encourage savings in RRSPs were removed. To add to the challenge of planning for retirement in Barbados- especially for the decimated middleclass – having taxed income via PAYE contributions to pension plans are also taxed as well as pension income exceeding $45,000 per annum and.
What about the our National Insurance Social Security Scheme (NISSS). Despite government’s best public relations it should be obvious to citizens the Scheme is proving to be a challenge for government. While it has cashflow to pay pensions owed in the short term, the future of the Scheme is bleak. Barbados has one of the highest social security contribution rates as well as age eligibility. To claim a full NIS pension one has to be 67 years old, soon to be increased to 67.5 in 2028 and 68 years old in 2034.
For umpteen years no NIS Reports. Then the same (NIS) Board which cannot produce a single annual Report, can miraculously produce a 23 page Report in ’22 on the Revitalization of the Fund. In ’23 the NIS is transitioned to the NISSS, still without a single annual Report from at least the prior 13 years. In Aug ’23, the PM tells us “they have Reports to 2016”. In the IMF Report we learn this is 2010-16 (where are the missing from before ’10?) and they have been sent to the Auditor General. The “Law” requires the Aud Gen has a month to review the Report, before forwarding it to the Minister who MUST present it (them) to both Houses of Parliament. Given the Aud Gen received 6 to 7 Reports at one time, said office should be granted 6-7 months to review? Given they were complete in Aug ’23, the Aud Gen had until the end of March ’24? Here we are 3+ months longer and still nothing presented in either House? More delay.
Society tolerates endless delay. In fact, it revels in it.
It is worth highlighting members of parliament are eligible for pension at the age of 50 or get two-thirds of their salary in pension after two terms in office.
The blogmaster invites you to join the discussion.