The Government's proposal to increase the minimum National Insurance retirement pension from $2,000 a month to $3,000 a month "during fiscal year 2012," is entirely laudable and its intention of broadening the country's social safety net commendable. The proposal, outlined in the budget speech presented on Monday by Finance Minister Winston Dookeran, rectifies an anomaly created in the 2011 budget when the Government-financed senior citizens' grant was increased to a maximum of $3,000. The 2011 measure created a situation in which those who had worked for decades and contributed to the National Insurance pension scheme received less than those who may have never worked a day in their life.
The 50 per cent increase in the National Insurance Board's minimum pension benefits was obviously the right way to resolve the anomaly. As with so much else in the budget speech, Mr Dookeran's statement on the increase in the National Insurance pensions is a good idea borne of good intentions but, unfortunately, there is little evidence that the idea or the intention were backed up by solid research, penetrating analysis, holistic thinking or scenario planning. There is no indication in the budget speech of how much this proposed increase of $1,000 in the NIB pension is going to cost the institution or any indication of the number of people who are likely to benefit from the increase.
There is some indication of how the measure is going to be funded with the minister saying: "We shall increase the insurable monthly income ceiling from $8,300 to $10,000. This will help to fund the increase in the minimum guaranteed pension indicated above. This measure will take effect during fiscal 2012." Mr Dookeran was careful to say that NIB's new $10,000 contribution band would "help to fund" the increase in the minimum guaranteed pension. This suggests that raising the income ceiling would only partly fund the increased pension but raises fresh questions about how the balance of the increase will be funded.
For the NIB, as with all national social security providers, questions about the funding of increases in benefits are of particular relevance. Generally, the NIB has only proceeded to implement increases in benefits after conducting actuarial reviews. Work on the most recent actuarial review, the seventh, was conducted over the period 2004 to 2007. Based on the analysis of the actuaries, who were sourced from the International Labour Office, the key recommendations were to increase the minimum monthly retirement pension from $1,000 to $2,000 and to implement a slow and gradual increase in the contribution rate over a five-year period, according to the NIB's Web site.
The actuaries envisaged that the contribution rate would have moved from 9.9 per cent in January 2006 to 10.5 per cent in January 2008 to 11.4 per cent in January 2012. In other words, after careful and long study of the population, its rate of aging, the increase in its wealth and other demographic factors, the experts decided that the funding of the $2,000 National Insurance pension benefit should be done in conjunction with gradual increases in the contribution. Increasing the pension benefit by 50 per cent would obviously throw a spanner in the careful analyses of the actuaries and could lead to a contribution rate higher than the 11.4 per cent predicted for January 2012.
Without the benefit of a full actuarial examination, it is probably impossible to indicate the many consequences of the decision to increase the pension benefits. Not only is it unclear which contributors will have to pay more to fund the increased National Insurance pension, it is also unclear how much more contributors will be required to pay. It is also quite disturbing that Minister Dookeran was not even able to provide specificity as to the timing of the increased pension benefit. All he was able to say was: "This measure will take effect during fiscal 2012," which runs from October 1, 2011, to September 30, 2012.