If the National Insurance Board (NIB) contribution rate is not increased this year, the fund stands to lose $95 million, Minister of State in the Office of the Prime Minister Myles LaRoda said today.
"I don't want to shock Bahamians, but the reality is if there is no increase in the contribution rate this year, the national insurance fund will lose $95 million," he told reporters outside Cabinet.
"That is just not sustainable and we have everybody doing their own... quarterbacking.
"The facts are this: The National Insurance Board will pay out $27 million each month in pensions. We are collecting $23 million. That leaves a shortfall of $4 million a month. Times 12, that's $48 million.
"We have not even considered the industrial benefits and other benefits that are being paid out."
LaRoda said some people have called on NIB to collect outstanding payments, which is pegged around $30 million.
"That's still only one month of contributions," he said. "Some of the issues as it relates to national insurance are not things that we could blame anybody for. Can we blame our citizens for living longer? No.
"And so, if they are collecting their pension benefits that could be as much as 20 years, when it was as about 10 years to 12 years in the beginning. This is where we are."
There has only ever been one NIB rate increase since NIB started in 1974 - the rate increased from 8.8 percent to 9.8 percent in 2010.
"People are living longer," LaRoda continued.
"They are collecting more benefits. The ceiling has raised from $400 to $700 plus. These are the things that we're dealing with. And if we have been losing money from 2016, for the past seven years, even those cash assets, the CDs (certificate of deposit) that you had, you have to crack those. Why? Because the government cannot subsidize the national insurance fund. It's paid for by contributions, or investments and rent that is being collected."
Last week, Prime Minister Philip Davis said the government was still trying to determine what to do as it relates to NIB.
"Yes, we have looked at the matter. We understand that we have to do something and we are trying to identify exactly what we do," Davis said when asked about a potential contribution increase.
"Increasing the rate is one of the options that we are looking into."
His comments came three days after LaRoda told reporters that Cabinet has reached a decision on the matter, though he did not reveal what that decision is.
The Guardian was informed that Cabinet reportedly agreed to a 1.5 percent increase that is expected to take effect July 1.
During the interview today, LaRoda said a wide range of issues are contributing to the fund's depletion.
"So, it sounds sexy that everyone has an opinion that one area is causing (the problem), whether it be management or administration costs. That's is but a small part of it.
"I just gave you simple mathematics. This month, some 4,000 people are collecting some form of pension benefit. Twenty-seven million dollars is gonna be paid out, $23 million is gonna be collected. You do the maths. That's just on the pension end."
Davis said last April and again last June that a rate increase was not in the cards, but the board had recommended that the government move quickly to effect the increase in time for January 1, 2023.
Given that that recommendation was not accepted, The Guardian learned that the board is hopeful that the necessary legislation be amended and the increase put in place for July 1, 2023.
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