Finance Minister Camilo Gonsalves says though the reform agenda of the NIS was delayed by the Pandemic and the volcanic eruptions, government can now can say with absolute certainty that the time for reform is now.
The findings and recommendations of the draft 12th Actuarial Valuation of the National Insurance Fund, which includes the public’s views, have shaped the proposed programmatic and parametric changes to the NIS.
Gonsalves says cabinet has approved for implementation a total of eight recommendations to improve financial sustainability, benefit adequacy and coverage.
The recommendations are as follows:
To Improve Financial Sustainability
Increase the contribution rate gradually from 10% to 15% with the planned schedule of contribution rate increases included in the regulations. The recommended schedule is presented below, with the first increase effective 1 June 2024:
a.1 June 2024: 12%
b.1 January 2025: 13%
c.1 January 2026: 14%
d.1 January 2027: 15%
In the case of employed persons, this increased contribution rate will be split evenly between the employer and employee.
2.Change the current age pension to a retirement pension. This includes not awarding early-age pensions to those who have not retired or still earn more than 50% of the wage ceiling. Early-age pensions would, therefore, only be paid upon retirement or to the elderly with lower incomes rather than to everyone who claims before the pensionable age.
3.Increase the reduction factors that apply to early-age pensions from !” percent per month (6 percent per year) to “# percent per month (8 percent per year) to discourage early-age pensions.
4.Increase the reference wage period used to compute pension from the five best years to the seven best years of contributions.
To improve benefit adequacy
1.Increase insurable wages from $1,000 per week ($4,333 per month) to $1,200 per week ($51,996.96 per annum), effective 1 April 2024.
This increase will ensure that the NIS remains relevant to higher-income workers in Saint Vincent and the Grenadines.
2.Increase the minimum pension from $70 per week to $80 per week, effective 1 March 2024.
This increase will protect the most vulnerable category of pensioners who have witnessed a disproportionate reduction in the real value of pension due to recent inflationary pressures.
3.Introduce a permanent unemployment benefit starting January 2025.
Gonsalves said this benefit is necessary to broaden the safety net for workers to cover the risk of loss of income due to temporary unemployment.
To improve coverage the NIS will;
1.Enhance the marketing campaign to extend social security coverage for self-employed participation:
a.Allow self-employed persons to qualify for Employment Injury Benefits.
b.Implement a new approach for self-employed and informal sector workers to pay contributions to the NIS easily.
According to the draft 12th Actuarial Valuation Report, the above combination of reform measures would, in the short term, improve the financing and reduce the Fund’s long-term costs. The proposed reforms would significantly improve the long-term viability and sustainability of the Fund.
Without any reforms, the Fund will not be able to continue meeting its obligations in the manner that it currently does beyond the year 2035. However, with the prudent and people-centred reforms announced today, that date is projected to be pushed back until the year 2060.
The work on the necessary parallel reform, namely the necessary improvements to our public pension system is also well-advanced. The Government will announce next steps in this important process in the first half of 2024.
