Transcript Document
NIS PERSPECTIVE ON PENSION
& PENSION REFORM
PREPARED BY: DORSET CROMWELL
DEPUTY DIRECTOR
NIS
OVERVIEW
The NIS a legal entity by People Law No. 14 of
1983
Provident Fund which was established in 1969
Benefits include sickness, maternity, funeral,
employment injury & pensions.
Contribution of 9% required
Allocation to the three benefit branches; Shortterm, Employment Injury and Long-term
Distribution as follows; 1.3%, 0.3% and 7.4%
LTB accounted for 82.6% of expenditure in 2010
OVERVIEW
2010 Reserve stood at $697,010,447
Average 10 year increase of 10.3%
Average 5 year increase of 9.2%
Reserve as a percentage of GDP of 49.7%
Rate of growth
Expenditure ratio 16.6 years
Up to 2010 collection totaled $694.5M
Earned $381.4 M in investment income
Benefit expenditure totaled $322.9 M
$248.6M on pensions and other Long-term benefits
FINANCIAL OVERVIEW
AMOUNT OF RESERVE
Table 15 - Financial projection: Actuarial Balance (in millions), 2009-2069
GAP
of
18.6%
2009 Year-end Reserves
Plus PV of Future Contributions
Minus PV of Future Expenditures
Equal PV of Surplus/(Shortfall)
Actuarial Balance (% of PV of insurable earnings)
Actuarial Balance (% of 2010 GDP)
661
2903
5992
(2428)
-7.5%
171%
PENSION COST
Examined pension history of 696 former age
pensioners
Contributed $4.9 million
Payments totaled $23.2M
Average repayment period of 1 year and 7
months
Max repayment of 4 years and 1 month
Pensioners received 31.8 times contribution made
DESIGN CONSIDERATION
Ideal replacement rate in retirement
NIS replacement rate
Current maximum of 49%. 60% in 2022
What prudent approach? Individual plans each
giving 70-80%;
Cost to employers? Cost of doing business in country?
Or integrated pension system/retirement
planning system
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PENSION REFORM
Parametric reform measures offers a more viable
and prudent approach to pension reform;
Adjustment to ceiling
Normal Retirement Age
Contribution rate
Accrual Rate
Career Average Pension vs. Final Average Pension
Eligibility requirements
Access to capital markets
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PENSION REFORM
However NIS has ceiling of $3,500 increase to
$5000 in 2014
Real replacement rate for person above the ceiling
Impact of low ceiling on quality of pensions.
Max replacement rate of 49%
If salary is $7000 RR will be 24.5%; at $8000 RR will be
21.4%
Ceiling should be high enough not to
disadvantage middle to high income earners
Ceiling does not stifle National Savings
The timing and magnitude of the increase in the
ceiling should be legislated
The same should happen with pension increases
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PENSION REFORM
Globally improvement in life expectancy
Has lead to increasing NRA
Adjust age of first payment in keeping with
demographic shifts
Number of employer have age 65 as retirement
age
Both salaries and pension paid
Coordination of various NRA
Shift in NRA for 60 to 65 extends the life of NIS
from 2041 to 2048
Increase over 20 year period
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PENSION REFORM- RETIREMENT AGE IN
SISTER SCHEMES
Anguilla, BVI and the Bahamas NRA is 65
Belize and Bermuda NRA is 65
Jamaica NRA is 65 for men & 60 women
Dominica, St. Vincent & Antigua NRA is 60.
Each have actuarial recommendation to move to
65
Barbados is 66 on its way to 67
St. Kitts NRA is 62
St. Lucia is 63 on way to 65
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CAREER EARNINGS VS. FINAL AVERAGE
Ins. Earnings
SALARY
0
Years of Contributions
“THERE IS NO LASTING PEACE
WITHOUT SOCIAL JUSTICE
THERE IS NO SOCIAL JUSTICE
WITHOUT SOCIAL SECURITY
THERE IS NO SOCIAL SECURITY
WITHOUT SOUND FINANCING”
-ILO
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