CMC – Prime Minister of Grenada, Dickon Mitchell, Tuesday announced that the National Insurance Scheme (NIS) is to undergo significant legislative changes as part of measures aimed at preventing it becoming bankrupt in the next decade.
“This government intends to act, and we intend to act quickly …this National Insurance Scheme is steering bankruptcy in its face if we do not take the necessary measures to ensure that the fund is put on a sustainable path,” Prime Minister Mitchell told the end of Cabinet news conference.
He told reporters that some of the major stakeholders, such as trade unions and the Public Service Commission (PSC) are willing to do what is necessary to facilitate the changes to save the scheme which was established in April 1983.
“And the fact that the major players have indicated their willingness to support the changes and had called upon the prior administration to act is testimony of the fact that we are partly in this situation because of past failure to act and we cannot continue like that,” he said without indicating how soon these will be presented to the Parliament for approval.
“However, before the legislative changes are placed before the Parliament, there will be a public education campaign explaining the justification for the changes. Among the changes will be an increase in the pension age, an increase in contribution, and repealing or amending clauses as it pertains to survivors’ benefits,” Mitchell said.
The NIS is equivalent to what is referred to in other countries as “Social Security” and Phillip Telesford, who is the Minister responsible for NIS, said that the NIS Board has made numerous submissions to the previous administration for certain interventions and certain actions by way of legislative changes.
“What we have noticed is that a lot of these recommendations are still in their embryonic stage of condemnations, Cabinet has approved but no further steps taken in order to ensure that the proper changes have been made. So we have reviewed all of that and have come to the conclusion that immediate intervention and careful intervention has to be administered in order to save the NIS,” he said.
Telesford said that the increase in pension age is causing the biggest worry for the authorities, noting that “from the seventh actuary review back in 2004 to present, every single time, the actuary requested that the requirement age be amended.
“So, over the last 18 years or so the recommendations have been made for the amendment of the retirement age,” said Telesford, adding that the NIS continues to pay out more that it is receiving.
“The NIS presently is breaking deposits to pay pensioners because the inflows, the income from the payment of NIS dues is less than the benefits that is paid out under the NIS Act. So notwithstanding that, we have a very youthful population we are still at this stage paying out more than we collect. So every year, NIS has to be breaking deposits to facilitate the payment of pension to retirees,” he said.
“That is unsustainable, as a matter of fact, if the NIS were to continue like this within the next ten years or so there will be no NIS.
“We have looked at information from throughout the region and we recognize that Grenada is behind when it comes to legislative changes to the scheme, Grenada needs to do what is necessary at this stage to shift the retirement age gradually from age 60 to 65, that recommendations were made several times since 2004 by the actuary until now,” he added.
According to the 2020 NIS annual report which was tabled in the Houses of Parliament last year, the year 2020 was one in which the National Insurance Board (NIB) demonstrated its ability to overcome challenges while remaining focused on the continuous improvement and sustainability of the Fund.
“For the first time in its 37-year history, the NIB engaged in parametric changes aimed at addressing the financial pressures on the Scheme in keeping with the recommendations of multiple Actuarial Reviews,” said the report which pointed out that in January of 2020, the contribution rate was increased from 9% to 11%.
“This was the first of the two recommendations made by the Actuary in the 11th Actuarial Review. Although the Government, as part of its stimulus measures reverted the rate to nine per cent in April, it returned to 11 per cent on August 1, 2020. Additionally, work commenced in earnest to legislate the increase in the pensionable age,” said the report, which shows that the increase in pension from 60 to 65 should be done over a ten-year period starting in 2023 when the age will increase to 61.
The next change will in the year 2025 when the retirement age will increase to 62 followed two years later when the age will be 63.
The Labour employment legislation does not have an age of retirement. The retirement age starts at 50 for some public service professions while in the private sector it is based on the NIS Act.
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