LaRoda says NIB rate increase cannot be 'circumvented'

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June 07, 2022

While acknowledging that the Davis administration has decided not to deal with the issue of increasing the National Insurance Board (NIB) contribution rate at this time, Minister of State in the Office of the Prime Minister Myles LaRoda, who pointed to several other reform options for the fund, said the “increase in the contribution rate cannot be circumvented”.

LaRoda said the issue is that the fund is expected to decline sharply in the next few years if reforms are not put in place.

“One essential reform iterated and referenced in the previous actuarial review is an increase in the contribution rate,” LaRoda said during the 2022/2023 budget debate last week.

“Mr. Deputy, the prime minister had made a position and the position of the government is that we will not visit that at this time until we have put our workers, in particular those at the lower level, and those businesses as they recover, in a position to do such an absorption.

“But Mr. Deputy, these are the facts and facts are a stubborn thing.

“The national insurance scheme does not function independently of the national demographics.”

LaRoda said the 11th NIB actuarial report indicates low fertility and mortality rates in The Bahamas and a steady flow of migration.

“In a social security system where contributions and employees pay to fund pension benefits, women having fewer children, coupled with an aging population means that there are less individuals to meet the benefit demands of the scheme,” he said.

He added, “In summary, the amount paid in benefits is increasing, the number of persons contributing to the scheme as a ratio is decreasing, thus the need for an increase in the contribution rate.”

The 11th NIB actuarial report warned that, unless urgent steps are taken, the fund would be depleted by 2028.

LaRoda said the report recommended a rate increase of “1.5 percent to 2 percent annually, biannually for a period of time”.

The last NIB rate increase took effect after amendments to the National Insurance Act were introduced in 2010. The rate increased from 8.8 percent to 9.8 percent to facilitate the addition of NIB’s unemployment benefit.

It was the first rate increase since NIB was started in 1974.

LaRoda said the report also recommends, among other things, “a modification of the pension accrual rate; the modification of the retirement age; and the modification of funding of the assisted benefits”.

“Again, these are the recommendations that have been made in the actuarial report,” he said.

“The government has made no decision as to when or if they will be implemented. The prime minister has decided that this government will not, at this present time, deal with the increase.”

He continued, “While these reform options will lessen the financial pressure on NIB in the long term, the increase in the contribution rate cannot be circumvented.”

According to LaRoda, NIB is paying over 43,000 pensioners “some $25 million each month”.

He said there is $1.5 billion in the fund, as of December 2021.

LaRoda first raised the issue of an increase in the contribution rate in April. He said then that he expected the rate to increase in the next year.

However, a day later, Prime Minister Philip Davis said “it’s not going to happen”.

“The minister of state in my office was just speaking the facts as what was said in the actuary report,” Davis said.

“They are recommending and they are urging that we do so. As was his duty, he is bringing that report to Cabinet for us to look at and discuss it.

“We will consider it. But insofar as what my views are on it, it’s not going to happen. Not now. Not until we have brought relief to our Bahamian people and we have put to bed some of the issues that can’t make them sleep when they go to bed.”

In his budget communication on May 25, Davis announced an increase in salary for most public servants as part of the government’s strategy to cushion the impact of the global inflation crisis.

The 2022/2023 budget includes a $56 million increase in wages and salaries.

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News date : 06/07/2022    Category : About Bahamians, Business, Finance, Nassau Guardian Stories

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