NIS inefficiency leading to fewer contributors, some elderly not getting pensions -review

Inefficiency in the National Insurance Scheme (NIS) has resulted in a large portion of the workforce not making contributions to the scheme and some elderly persons not receiving pensions.

This is one of the damning findings contained in the draft eighth actuarial review of the NIS which was done by Horizonow and was submitted to the Government of Guyana in October. This review is to be discussed by local stakeholders with the author later this month.

Addressing administrative efficiency, the author said that this relates to how well the tasks are done and how much it costs to execute them. “In both respects, NIS is underperforming”, the review argued. It said that foremost among the critical underperforming areas is the matter of contributions as it relates to collection and record posting.

“These have led to (a) large portion of the workforce not making NIS contributions and many elderly insureds either not receiving a pension, being awarded a smaller pension than what they are entitled to and having to wait years to receive it”, the review stated.

Many pensioners have complained over the 25 years that Stabroek News has been in business about intractable problems in getting their pensions. The problems fall generally into two categories. Many pensioners are told that their records cannot be found. Pensioners at age 60 and above are then made to revisit old employers to seek to recompose records and return to the NIS. Even then there is much running around and sometimes pensioners give up.

A second problem is that eligible pensioners are often told that they do not qualify for a monthly pension and are encouraged to accept a one-off lump which is far below the accrued monthly benefit they would have received. Some pensioners fall for this given the runaround that they are subjected to. Incomplete records would also result in pensioners receiving a lower pension than entitled to.

Editorials in Stabroek News have over the years called for contributors who have attained the minimum number of contributions for a pension, to be given a certificate by the NIS verifying this, so as to avoid pensioners in their later years having to endure frustrations at the scheme because of its poor record keeping.

Said the review: “The unavailability of complete and reliable data and the difficulty often involved in accessing certain data is another weakness. Major enhancements to the IT system are critical to enhancing efficiency”.

The review also said that it must be noted that with staff-related costs taking up more than 64% of operating costs , significant savings can only come from reducing staff.

It noted that 14.6% of contribution income was spent on operating costs over the last decade. It said that while this was not excessive by regional standards, a lower rate would have been expected by virtue of the relatively larger number of contributors relative to most other Caribbean countries.

The review said that while there is no single target for social security systems, lowering the operating cost to 10% of contribution income over five years via increased collections and reducing operating costs should be fixed as a core objective.

As a means of improving efficiency, the review also said that the government should consider moving towards a single collection agency for all taxes and NIS contributions.

“Not only should such an organization be less costly to run it should also be able to collect more revenue given its access to various sources of information”, the review said. It added that using a single agency to distribute pensions – NIS, old age non-contributory state pensions and civil service pensions – would also lead to overall cost savings to the NIS and the government.

The review has said that the NIS is approaching a crisis and that the government has to take urgent steps to implement change. These include raising of the contribution rate from 13% to 15% no later than January next year, hiking the wage ceiling to $200,000 per month and a phased raising of the pension age from 60 to 65.

The Executive Summary of the actuarial report noted that in 2011 the NIS experienced its first ever deficit in its 42-year-old history of $371M. A larger deficit is envisaged this year and the report said that with assets of just over two times its annual expenditure the “entire Fund will be exhausted in less than 10 years if (the) contribution rate increases and benefit reforms are not made immediately”.

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