Increased pension payouts without increased contribution as well as a significant or “criminal” number of people not making National Insurance payments have lead to the strain on NIS, the business community has said.
Both the Trinidad and Tobago Chamber of Commerce and Industry as well as the American Chamber of Chamber of Commerce T&T agreed with the suggestion made by Finance Minister Colm Imbert during a webinar hosted by the Latin American Development Bank (known as CAF) that an adjustment to the retirement age would be needed to ease the NIS’s burden.
However both pointed out there were other challenges in addition to the ageing population concern.
AMCHAM Chief Executive Officer Nirad Tewarie said the issues facing NIS was “multiple fold” but noted that the pandemic had exposed just how many people had not been making contributions and in the process placing further burden on the NIS scheme.
“The more immediate thing and the pandemic laid this bare is that the number of People who are supposed to be paying into the NIS system and who are not is literally criminal. There are people who are supposed to be paying into the NIS system who are not and that exacerbates, the situation of fewer contribution than withdrawals,” he told the Sunday Business Guardian.
He said this too needed to be address to further alleviate concerns about the strength of the NIS.
“Therefore, the government has to ensure just like, they must ensure that we widen the taxnet, they have to ensure enforcement so that people are paying into the system, and they have a whole treasure trove of data now,” said Tewarie pointing to the applications made during the COVID-19 pandemic which would have come forward seeking assistance when their revenue streams were affected.
“Because of all the people who would have claimed unemployment relief benefit as part of COVID unemployment relief benefits and whose information cannot be found in the system. You can now use that as a starting point to go and find people who have not been paying who should be paying and that will give you an immediate boost and injection into the system. An infusion of cash into the sector,” he said.
The population demographic also needed to be assessed as even with the increase in payments, the problem of decreasing contributions versus increasing payouts still would need addressing sooner rather than later.
“Of course, life expectancy is increasing, which is a good thing, which means that they’ll need pension for longer and that becomes problematic, however we have an ageing population, meaning that there are fewer younger people relative to the older people that we have in the country. And projected for the next 30 to 50 years, making that even more of an issue is the fact that the labour force participation rate is falling,” he said, explaining that this would continuously see contributions into the system fall while withdrawals increase.
“So we have to deal with the population demographic as we plan for a sustainable future and that is why we have repeated repeatedly called for an urgent attention to be paid to a national migration policy. I am happy to say that the Minister of Labour, and I have discussed this and he has been looking at that.
“We need a national migration policy to help us address of population demographics,” he said,”Otherwise, we are not going to have enough people in the country to work, create businesses, to be able to be sustainable in the future.”
TT Chamber CEO Gabriel Faria said his group recognised the current challenges faced by the National Insurance scheme and had been speaking to government for quite some time about the issues, and had made recommendations including “changing the retirement age along with some adjustments in the contribution rates. “
Faria noted that this problem was not unique to Trinidad and Tobago, as he pointed out that Barbados in 2018 adjusted its retirement age to 67 for similar reasons.
“We support this for a number of reasons. It’s been implemented in other markets, in other countries in the world. Also many people, as we live longer, as our health improve, people are able to contribute meaningfully to the work environment way past 60. So this is an excellent opportunity to leverage the skills of our citizens while reducing the risk of the NIB scheme being underfunded,” he said noting that in Barbados 67 is also not the compulsory retirement age as workers can choose to go on until 70 and delay their benefits to suit.
“Based on using that as a template, and I believe this has been Barbados just across the waters, but I am I seeing this is being implemented in other countries and I think it’s a very, it’s a justifiable adjustment,” he said.
However Faria explained that there had been an acceleration in the strain when pension payments were adjusted up over a decade ago and in the process increased payments significantly.
“The government made the decision to guarantee a pension of $3,000 which tended to put a lot of pressure on the National Insurance system because those people were not contributing at a level for them to earn the $3,000.
“So what that did is that put pressure on the base system,” said Faria who noted that at the time of the change, the pension payment was either equivalent or more than the salaries of many low income workers when traditionally a pension would be equivalent to two thirds of a workers’ last salary.
During his presentation to CAF, the Finance Minister noted that it was directly equivalent to a minimum wage salary.
National pension was raised to $3000 in 2010, the minimum wage per hour was raised from $15 to $17.50 in December 2019. It was $12.50 per hour in 2010, which was raised to $15 in 2015.
Faria stressed that a change in the retirement age did not necessarily have to be seen as a negative as more people are proving that they can be work and contribute meaningfully at older ages due to improved attention to their health.
He however admitted that the view of it was mixed.
Head of the Federation of Independent Trade Unions and NGOs Joseph Remy said the strain on the National Insurance Board had been an issue the Trade Union movement is aware of but said they were not impressed that the Finance Minister chose to use that platform to raise the suggestion of raising the retirement age especially given the economic impact of COVID-19 on the labour market.
“It is not just a simple mathematical formula retirement age calculation and, and yes, we have data that we have an ageing population that lives longer. And we are glad, It means that people are taking their health seriously,” he said, stressing that the matter needed to be properly discussed in line with Tripartite agreements.
“We have to discuss the impact on social security in a meaningful manner. True collaborative discussion,” said Remy.