Tag Archives: National Insurance Fund

NIS Pension Warning

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Chairman of NIS Board Leslie Haynes

One of many concerns Barbados Underground has been championing through the years is the rate of depletion of NIS funds. Quoting former Minister David Estwick who addressed the matter last week, “the operating balance at the NIS becomes negative by 2028, six years from now…and the NIS funds would be depleted in 12 years. Compounding the problem is a matter of poor compliance”.  Do we have the capacity to run with the message for the purpose of engaging in constructive debate?

There are not many other ways one can continue to express concern about the management of the NIS by the Barbados and Democratic Labour parties through the years. Although Prime Minister Mottley has given the assurance the NIS is nowhere near to a crisis situation, the reality of the numbers tells a different story for the independent minded.

The country awaits the outcome from a recent national consultation on the NIS when it is anticipated significant changes will have to be implemented. As it stands our NIS contribution is one of the highest in the region with age eligible for full pension benefit being 67. The fact we are labelled an ageing population with restricted opportunity to expand the pool of contributions has opened the door for managed immigration.

While this blog highlights the NIS fund, the burgeoning pension liability of government for the public service, both central government and SOEs adds to the problems a future generation will have to wrestle.

Barbadians have jumped on the bandwagon and have become addicted to the latest flavour of gossip news. In the meantime…

The following article posted in the Nation newspaper on May 25, 2023 with the title Retirement crisis looming, says former Minister is recommended reading.

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Age Discrimination at the Barbados Golf Club

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In recent weeks there have been accusations directed at Minister Kirk Humphrey who is responsible for elder affairs, concerning his unwillingness to accept feedback from the public. At the root of the back and forth – two lawyers and a legal assistant in a fit of public civic mindedness drafted a 53 page document, the objective, to inform legislation affecting the elderly. A noble effort by any measure. It therefore boggles the mind why parties concerned have turned this into a battle royale.

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Democracy, Apathy and the National Insurance Fund

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For many years the blogmaster and others have posted voluminously about the importance of the citizenry actively participating in the type of democracy parodied from the former colonial master. While no man made construct is perfect the system of democracy practiced by the Western world is described – some will say by the cynics – as the worst form of government except for all the others that have been tried. 

Several reasons (excuses) have been offered for the increasing cynicism, distrust and apathy being directed by Barbadians at government – with decreasing voter turnout to elect members to parliament and poor turnout at town hall meetings to critique government sponsored initiatives is a good litmus test.

In recent days the Prime Minister of Barbados Mia Mottley has finally had to declare to the public the sorry state of the National Insurance Fund (NIF). For political reasons she indicated that the condition of the NIF was brought to her attention in June of 2022. However, keen followers of local affairs will recall that after winning the 2018 general election she stated publicly the National Insurance Scheme (NIS) was in a mess and the government will have to circle back to it at some point. Also the 2015 NIS Actuarial Review along with Walter Blackman and other social commentators sounded off concerns about the rate NIS pension benefits were outstripping savings going back to the 2015 NIS Actuarial Report. 

Here is something we know, Prime Minister Mia Mottley CANNOT deny the poor state of financial discipline in the public service evidenced by over a decade old Auditor General reports. Can we reasonably assume she will assemble ALL permanent secretaries and relevant personnel as a matter of urgency to correct the problem? Surely poor financial management in government departments must be made a priority to ensure there is efficient use of scarce taxpayer resources? Then again didn’t the late prime inister David Thompson assemble the top management of state owned entities (SOEs) in 2008 to warn better was expected and how has that progressed 15 years later?

We are here now and Barbadians have been promised the opportunity to participate in stakeholder sessions to help with reimagining a NEW NIS Scheme. The blogmaster anticipates there will be energetic public participation given the threat of reduced NIS benefits and possible changes to eligibility. 

Do Barbadians understand the reason for the current state of play at the NIF – as one example – has a lot to do with the disinterest demonstrated to actively participate in our democracy? The disengagement has created a situation where the tail is wagging the dog and given rise to a marauding political class. Imagine if the same noise currently polluting the public space about the NIS was able to be sustained on the many other serious issues always confronting the country. 

The importance of a robust governance framework cannot be underscored as it relates to ensuring an efficient implementation and management of policies, accountabilities and performance to name a few components. If Barbadians are as intelligent as the size of the national allocation to the education budget suggests, there must come a time IQ/EQ is tangibly demonstrated through citizen advocacy even if it has to resort to civil disobedience. History is replete with examples to support meaningful change is only achieved when extreme positions are taken.

Rise of the Uneducated Class

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Many issues of the day continue to question our ability to govern. One of them is the health of the National Insurance Fund (NIF). If you listen to the politician while in Opposition, it is a fund under stress. If you listen to the same politician on attaining the office of government, the NIF is described in more positive terms.

For the sober in the crowd there are the actuarial reviews to consider. Successive governments have been unresponsiveness to public inquiry about  releasing the reviews for public consumption in a timely manner. Of equal concern has been the inability of successive governments to ensure the timely release of audited financials to parliament.

Generations of Barbadians have contributed to the NIF to give currency to the tagline – it is our lifeline.  Auditor General report after report detail bad investment decisions taken by successive governments of  National Insurance Scheme (NIS) motivated by pampering and pandering the old boy network. The “investment” of USD60 millions in Clearwater Bay referred to loosely by Barbadians as Four Seasons is one example.

The NIS is one of a handful of state owned entities that should be ring-fenced to protect against the incompetence of the political class.  Judging from all reputable sources of economic data, the inability to adequately govern a 166 square mile, less than three hundred thousand people located in an idyllic geography should be evidence enough.

Prime Minister Mia Mottley and the Minister of Education Santia Bradshaw have signaled in recent weeks that major reform is coming for the education  system. The issue of revamping the  system has been discussed for decades by the more progressive minds. The inability of our leading lights to manage the NIS and the other entities that combine to ensure well functioning organs in the society is an indictment on the current system of edcuation.

Successive NIS Boards, NIS Investment Committees and the ancillary services have been managed by “educated” Barbadians.  The performance of the NIS like the judiciary, like the BWA, like the transportation system, like the waste management system, like the PSV sector etc etc all point to the inability to convert significant investment in education in the post Independence period.

The Barbados Labour Party (BLP) since wining office in May 2018 has aggressively pursued economic strategies to address an economy in free fall.  Interestingly, we have not observed the same urgency to address challenges with the NIS. In fact Prime Minister Mia Mottley hinted that the hesitation to address the NIS problem is rooted in the enormity of the solution required given the future obligations of the fund.

This week it was reported that millions of  Brazilians protested against President Jair Bolsonaro’s plan to privatize the pension plan. The story attracted the attention of this blogmaster because one senses that Barbados will have to implement draconian measures to protect the NIS for the many sooner rather than later. Already President hBolsonaro as suspended several benefits to Brazil’s low income, disabled and senior citizens. Only a few years ago Brazil was considered the emerging economy from the Latam region.

Related links:

Brazil: Bolsonaro to Suspend Senior, Disabled Benefits Programs

Brazil: Millions Protest Bolsonaro’s Neoliberal Pension Reform

The message to Barbadians is that we cannot continue to do the same thing all the time and expect a different result.

BB = P+G (E*SOEs +NG-S)

 

 

Government MUST Clear the Air on the State of the NIS Fund, it is Our RH Lifeline

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ian_carrington

Ian Carrington, Director of Finance

Ten  years have elapsed since the 2008 global financial meltdown left Barbados exposed for the open economy we have been taught it is in primary school. Across the Caribbean our little economies find themselves in the same boat with high debt to GDP and rotting infrastructures, rising corruption and a dearth of leadership.

Barbados WAS considered the gem of the Caribbean.

With all of our problems – some of our making – others caused by the vagaries of life’s existence- the blogmaster is concerned that after five months in office no definitive statement has been formally issued by the government about the current and future state of the National Insurance Scheme (NIS).

  • Is the NIS fund still marketed as our life line?
  • Was it established to provide financial support to citizens in the golden years?
  • Is the knowledge that we have a well managed NIS  fund an emotional comfort for the citizenry?

It appears from all the talk we have been hearing the NIS Fund is under threat. Given the catastrophic impact a failing fund would have on the Barbados society Prime Minister Mottley would do well to schedule another press briefing to lay the issues on the table and outline, what is the plan to stabilize and rescue the fund after it was used as a lender of last resort to add debt like no other time in modern history. To add to the problem, we have been told the former government didn’t pay 400 million dollars in employee deductions to the fund.

The blogmaster has posted several blogs about the lack of management demonstrated by successive NIS Boards and by extension government. The latest Actuarial Review is late (what is new?). Audited financial statements of the fund have not been laid in parliament to comply with the law for many years. Several projects funded by the NIS and decisions taken have been questionable.

  1. Prime Minister we need to know when the Actuarial Review due will be completed or if it was completed when will it be made public?
  2. Prime Minister we want to know when will the audited financial statements be laid in parliament and soon after be made public?
  3. Prime Minister we want to know on what basis Ian Carrington who was director of the NIS fund during the lost years has been given a leading role in the BERT execution in his current role as Director of Finance?
  4. Prime Minister we want to know why Dr. Justin Robinson remains active given his leadership role on the important Boards of the Central Bank and NIS Boards.
  5. Prime Minister we want to know who will be held accountable for the unconscionable squandermania of NIS funds in the last ten years.

In the debt restructure project the IMF document details that:-

NIS: T-bills, treasury notes and debentures. T-bills held by the NIS will be swapped for the new 15-year debenture; and its treasury notes and debentures will be exchanged for a 20- year discount debenture. The debenture will have with a 2-year grace period. Principal will be reduced by 17.5 percent at the issuance of the security; after the 2nd successful review under the proposed EFF-supported program, principal will be reduced by an additional 12.5 percent of the original principal; and after the 4th successful review under the proposed EFF-supported program, principal will be reduced by a final 5 percent of the original principal. Interest will be paid at a rate of 4 percent per annum for the first 3 years, followed by an interest rate of 8 percent per annum for remaining years.

Leading into the last general election the blogmaster had a brief exchange on Facebook with the former Chairman Justin Robinson about when current NIS financial will be laid in parliament- his response did not give hope the matter will be resolved anytime soon.

Prime Minister Mia Mottley you have been a big advocate for transparency AND accountability in government. We waiting to see!

When Political and Investment Considerations Intersect to Affect the NIS Fund

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Chris Sinckler, former Minister of Finance
Esther Byer, Minister of Labour
Dr. Justin Robinson: 2011 to 2018

In response to an an exchange between David of BU and Hal Austin on the NIS Dumps 21 Million Dollars in Apes Hill Development blog, respected Barbadian actuary Walter Blackman responded with a comment deserving of deep thought and rich discussion by Barbadians everywhere – Barbados Underground

Hal Austin March 31, 2017 at 11:53 AM #

David,
I know it is fashionable to blame individuals, but should we not be blaming the minister, who is ultimately accountable; the chairman of the NIS, Justin Robinson, and members of the investment committee; and the person(s) who carried out the due diligence? In any case, this is not an investment, but a loan. Is the NIS authorised to make commercial loans to private businesses without the approval of parliament?

David March 31, 2017 at 3:29 PM #
@Walter
Know this is a busy time for you but an opinion on this matter given your expertise would be valued.

David,

I don’t believe that the governance structure of the NIS has undergone any radical change in its 50-year existence, so I will state these pointers from memory, as a means of steering the discussion in the right direction:

The NIS Board is a corporate entity with a corporate seal. It can transact business in its own right. The National Insurance FUND was established under the control and management of the NIS Board. However, when it comes to the fund, there are two instances where the practical power of the Board either intermingles with, or is superseded by ministerial power.

One, the Board with the approval of the Minister responsible for Social Security, may write off sums of money from the fund as losses.

Two, any monies belonging to the fund may be invested by the Board in whatever manner, and in whatever securities, that the Minister responsible for Finance may direct.

The Minister responsible for Social Security, and the Minister responsible for Finance are two political positions which, by nature, tend to put political considerations first. For example, in the realm of extreme probability, whilst a directed NIS investment decision can end up in hundreds of millions of dollars forever being lost, it may provide invaluable political benefits. Additionally, hundreds of millions of dollars can be written off as losses to the fund, in instances where borrowers have the capacity to repay. Such decisions might prove to be injurious to the fund, but may be calculated to provide excellent political payoffs.

The governance structure does not subject these extreme positions to any “prudent man” rule at the transactional level, so any “blaming” would have to manifest itself in political terms at election time. Of course, this depends on how vigilant or sensitive the electorate is to the management of NIS funds.

In the 2013 general election, our current Minister responsible for Finance, the Hon. Chris Sinckler, would have been subjected to a great amount of “blame” for the millions of NIS funds which were considered to be wasted on ill-fated projects. The electorate held him to be “blameless” and returned him to parliament. It is highly likely that the electorate will return him to parliament when the next general election comes around.

Our current Minister responsible for Social Security, the Hon. Dr. Esther Byer-Suckoo, is seeking to avenge the political defeat she suffered in 2013. With respect to the NIS fund and any associated problems, her political opponents will be expected to highlight instances, if any, where she injudiciously approved the writing off of monies, owed to the NIS fund, as losses. If they cannot do this, then she must be viewed by the electorate as totally and completely blameless when it comes to any mismanagement of NIS funds.

I tried to keep this comment short and simple whilst simultaneously tackling Hal’s questions. I have also deliberately left some dots to be connected by the more thoughtful and discerning BU readers and bloggers.

National Insurance Fund: Dr. Justin Robinson an URGENT Update is Required

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Dr. Justin Robinson, Chairman of the NIS

Dr. Justin Robinson, Chairman of the NIS

This space is created to accommodate comments about the National Insurance Scheme (NIS) of Barbados.  The BU household concedes that the management of the NIS as with any social security fund is a complex matter. It is against this background that Barbadians need to hear the technocrats explaining the status of the NIS fund and NOT the politicians.

It is unforgivable that in 2016 the public is not able to (re)view the financials of the NIS fund by clicking on the NIS website. Dr. Justin Robinson on several occasions assured the BU family in this forum that his Board intends to be transparent in its work and a first step is to bring up-to-date audited financials to the public.

The BU household invites Dr. Robinson to provide an update on the fund.

Understanding the NIS of Barbados (1) – Social Characteristics and Basic Structure

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Walter Blackman

Walter Blackman

Modern Barbados is a society which has evolved from a foundation of slavery. Since 1834, up to the present day, the institution of slavery on the island has been replaced by an overt but complex system of prejudice and discrimination based on colour and perceived class.

Putting the “red legs” aside, the perceived lowest class of citizen in Barbados is black in colour. This black colour-lowest class combination is viewed as the sociological pool from which our nation has historically produced its labourers, murderers, thieves, rogues, vagabonds, local prostitutes, and petty criminals, to mention a few categories. With the passage of time, this group has produced almost every type of citizen except the owners of large successful businesses or corporations with the capacity to survive through the ages.

At this end of our social continuum, there are some people who have worked hard to help raise their children and maintain their households and who have assisted significantly in the development of Barbados (e.g. housewives, small vendors, handymen) without ever being officially employed. We can therefore understand and appreciate the need for government to offer this group a helping hand whenever the need arises.

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Notes From A Native Son: Four Seasons, The End

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Hal Austin

The scandal over the national insurance scheme’s so-called investment in the stalled Four Seasons hotel and villa complex has now run its rational course. There is clearly no business or economic case for the investment, despite special pleading from Professor Avinash Persaud, the public face of the development, and a moribund government anxious to make as show of competence before the next general election. The decision to go ahead with the BDS$60m investment, on top of the rest, is political and not economic. It is also quite clearly a failure of the NIS’ fiduciary duty to scheme members and to future generations of claimants.

Recently, according to some reports, Professor Persaud, executive chairman of the troubled project, has been putting his case, with the articulacy that one would expect of one of the brightest economists of his generation. But, as has been the case all along, he has failed to convince that the so-called investment is one that the National Insurance Scheme should have been involved in.

Before looking more closely at what is alleged to be Professor Persaud’s case for the defence, I want to take a closer look at what the NIS should be, and what it is not.

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Notes From a Native Son – The Four Seasons ‘Investment’

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Hal Austin

The government of Barbados, despite sound public advice, looks set to go ahead with the Bds$50m ‘investment’ in Four Seasons, the holiday project on the West Coast, which in time will become the biggest white elephant since independence. It is clear there is no business economic reason for the decision, as there is none, and the government’s decision to go ahead with pumping taxpayers’ money in to the project is political and not economic.

First, let us look at the only legitimate reasons for any such political intervention: first, job creation; second foreign currency earnings; and third, the need for top end tourist accommodation. Let us deal with the third reason first. Barbados needs further top class hotel accommodation like a hole in the head.

There are more than enough hotel beds available, which even at time of great demand, such as the Cricket World Cup, are still under used. During the CWC, hotels were only 70 per cent occupied. Even so, the government has a huge portfolio of hotels which it is at a lost as to what to do with it.

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Occupy Four Seasons In The Offing

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Submitted by John Dillinger

Tony Marshall, Chairman of the NIS Board

I have followed your blogs [BU] with regards to the Four Seasons and Professor Persaud’s decision to ask the NIS to invest in the project as opposed to bring in international investors like the late PM David Thompson mandated him so to do. Was not the Professor to use his international connections to bring in the investment needed to restart the project? If so should we take it that he has failed to get the interest of the international investment community..the hedge funds, venture capitalists etc. to invest in Four Seasons? If so, then why?

Moreover based on two recent articles in the Nation Newspaper, one on November 24th quoting Minister Chris Sinckler as saying he expects the NIS to make a decision by the end of this week (coming after the now famous extraordinary Cabinet meeting of November 15th to “discuss” the Four Seasons project) and that the Minister of Labour and Social Security was “working closely” with the NIS on the matter. Does all of this smell like a hint of political interference in the NIS decision process with regards to the project at all, especially when it was reported that the NIS had been advised not to invest in the project?

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Prove That NIS Is Sound Before Investing In Four Seasons

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Caswell Franklyn, Head of Unity Workers Union

Government was advised, by an actuary, to take steps to protect the National Insurance Fund because they had calculated that the NIS Fund would be in trouble by 2035 if pensions were continued to be paid at the then existing rate. They reasoned that Barbados was an aging society, and with current life expectancy and a declining birth rate that there would be too few persons contributing and too many persons receiving pensions for the scheme to remain viable. The Government had several options to ensure the fund’s viability, and this is what they have done so far:

  1. Increase the pension age with the hope that more people would die before attaining pension age;
  2. Increase contributions;
  3. Change the formula for calculating the pension, resulting in a much smaller pension; and
  4. Give people the opportunity to receive a reduced pension if they applied early, and an enhanced one if they deferred applying for their pension. They guessed that there would be a neutral effect on the fund because the people who opted for early pensions would somehow be offset by the numbers who deferred. Unfortunately, hundreds opted for early pensions and less that 10 deferred as yet according to my information.

The corrective measures clearly show that the NIS Fund is under stress. It is inconceivable that the fund is as healthy as the Minister of Finance is telling the country. For the sake of argument let us assume that the Government is correct in their assertion that the NIS Fund is healthy. Then they must also explain why they thought it necessary to sell off the NIS shares in the Barbados Light & Power Company which were paying handsome dividend yearly, and projected to do so for the foreseeable future. If they needed cash so badly that it forced them to sell off assets, how can they justify the gamble of putting $50 million in the Four Seasons apparent white elephant.

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Do Not Touch Our Blasted NIS Money!

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Tony Marshall, Chairman of the NIS Board was summoned by the Prime Minister last week to Government headquarters

The taxpayers of Barbados have risen from their slumber this morning to the report that the NIS Board – headed by retired banker and talk show host Tony Marshall –  has been ‘briefed’ on the Four Seasons project by the Cabinet of Barbados and ‘ordered’ to relook its imminent investment decision. The Four Seasons project stalled when capital markets went soft as a result of the global financial crisis. The decision to work with Professor Avinash Persaud to revitalize the project was steeped with optimism given his reputed international connections. However after many promises that the project would have restarted the government is now seen as the creditor as last resort.

It is evident from commentary on BU and on the ground that Barbadians are very weary of using social security funds to bail the Four Seasons project. The 101 reasoning by many is if the project is as viable as Minister Chris Sinckler and the IDB believe then why is it so difficult to acquire private sector investment?  It was not very long ago in response to an actuarial study the NIS adjusted its pension eligibility as a result of the state of the NIS scheme vis a vis our ageing population. Barbadians have become very sensitive of late about how decisions are being taken about at the NIS. By the way has the CBC repaid that one million dollar loan yet? Did any heads roll as a result of the cockup with mailing old age pension cheques?

Related Links:

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Extricating The Barbados Economy From The Crest Of The Precipice

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The IMF Executive Board published its 2010 Article IV Consultation with Barbados and as you would expect all the local media channels are abuzz with its findings. The truth is BU attempted to read the 43 page document and gave up in fairly quick time after being nauseated by the feeling of déjà vu. We decided to get a local perspective by reading the Barbados Economic Society blog titled BES Survey of Economists’ Expectations – Q3 2010 and that did not help to improve our outlook for the economic forecast for Barbados. A surprisingly high number of local economists anticipate some growth even if it is marginal.

The reality has finally taken root that Barbadians just do not get it!

A layman analysis by BU supports the view that the government judging by its recent budget is relying on revenue measures to attack the burgeoning deficit. We have therefore seen the most significant increases in the VAT rate to 17.5% and a 50% increase on the excise tax on gasoline. All the experts seem to be suggesting based on the numbers that the inevitable will have to happen if the government insist on its current policy. Bear in mind the government has promised in a very uncertain economic environment to balance the budget by 2015/2015 fiscal year.

BU suspect this is a pie in the sky projection.

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