Plight of the NIS

With its urgent tone, the draft Eighth Actuarial Review of the National Insurance Scheme (NIS) has again lifted the veil into the country’s troubled social security system.  The reviewer, Mr Derek Osborne of Horizonow was blunt in his assessment, declaring that the scheme was nearing a crisis and immediate steps were required to pull it back from the brink including raising the contribution rate from 13% to 15% no later than January next year, hiking the wage ceiling to $200,000 per month, freezing pension increases and raising in a phased manner the pensionable age from 60 to 65.

A raft of other measures was enunciated in the report which in a matter-of-fact manner set out the jeopardy faced by the Scheme and other dangers such as an unbalanced investment portfolio and a low number of contributors. Mr Osborne also raised doubts about the quality of governance at the NIS and the efficiency of the Scheme. Reportage on the review drew immediate ripostes from the two government officials who have the closest connection to the NIS: the Minister of Finance, Dr Ashni Singh and the long-serving Chairman of the NIS, Dr Roger Luncheon.

Dr Singh was emphatic that the government would “never let the NIS fail”. The fact that the word `fail’ is referenced at all signifies the depth of neglect and disengagement shown by the government to the Scheme over the last 20 years.

Dr Luncheon was at his blustering best, playing down the seriousness of the report.

“Dire reflects some immediacy like yesterday…Is this NIS a sinking ship that is ready to go down? Nonsense… as we sit here today, the Scheme is healthy…I intend to draw pension for a good lil while’,  Dr Luncheon declared.

In the coming weeks stakeholders will dissect the proposals made by Mr Osborne and the government will then have to act legislatively and, importantly, with the support of the opposition. Hopefully this will lead to a symphony of cooperation on other matters in Parliament including the all-important 2013 budget.

It is, however,  the dangerous drifting of the scheme in the last 10 years in particular towards the cliff’s edge that should be exposed and stand as a damning indictment of the PPP/C government. There is no gainsaying that benefits paid out by the NIS have improved vastly as pointed out by Dr Singh. What is however more relevant is that Dr Singh, Dr Luncheon and the government would be acutely aware that no NIS can be operated in a manner where over two decades a variety of benefits would have been extended or inaugurated without consequential adjustments to the level of contributions or aggressive measures taken to ensure that the number of contributors was vastly expanded. That failure amounted to gross dereliction of duty.

Neither of those two matters has been addressed despite the fact that for the last decade there were pervasive concerns that the Scheme was  approaching a point where benefits paid out per annum would begin to exceed contributions taken in and that the largest single liability – old age pensions would begin to severely impact as the Scheme matured. The 2001 actuarial report had pointed in this direction. It was surely these concerns that spurred the same PPP/C government to establish a committee in 2007 to review the NIS, leading to the presentation of a report with recommendations to remedy the situation. However, for reasons known only to itself the government failed to act. The report of the NIS reform committee was followed by the seventh actuarial study which again underlined the serious problems facing the scheme.

Many of the urgent recommendations that are now facing the government from the eighth actuarial review could already have been in the midst of a phased implementation had the government of former President Jagdeo and the 20-year Chairman of the NIS, Dr Luncheon discharged their duties in a responsible manner. They clearly failed to do this. One is aware that to suggest to PPP/C governments that any of its leading lights should be removed for incompetence and poor performance is an exercise in futility and likely to lead to hysterics, yet it must be said that Dr Luncheon should have been removed from his position as Chairman many years ago because of the paralysis he presided over, and the management of the Scheme revamped. Nothing happened.

It is clear that in the backdrop of the NIS’ first ever deficit in its 42 year-old history last year and the likelihood of this becoming an annual feature that the government knows its time for meandering on the Scheme is over. This is undoubtedly why the oft ignored societal stakeholders are now being involved in consultations at the Office of the President on November 22.  The tough decisions that were ignored in relation to contribution rates and why so many people are not contributing to the Scheme now have to be faced frontally and the government will want the opposition and civil society on board.

Mr Osborne made the important point that the patent inefficiency of the Scheme and its dreadful record keeping has dissuaded many persons from contributing to the NIS and ultimately hurting the Scheme’s ability to cushion the benefits that are being paid out.

The Scheme’s investment mix is also out of kilter. Moreover, billions of NIS dollars was lost to the CLICO (Guyana) collapse in 2009 and while the government has promised to cover this using taxpayers’ money, nothing has been forthcoming. All of these matters have festered without any evident attempt to address them.

So grave is this matter that consultations in and out of Parliament on the future of the Scheme have to be devoid of political posturing and rancour. However, it is impossible to envisage any meaningful change taking hold of the Scheme if Dr Luncheon maintains his stultifying presence at the top. He must take full responsibility for the calamitous state of the Scheme and consequently should take his leave from that position.

Given its control of Parliament the opposition must play a leading role in the transformation of the Scheme. It must insist that the government and the Scheme provide all of the requisite data and information to guide discussions. Public consultations comprising both sides of the House and the full engagement of the Economic Services Committee of Parliament should feature prominently in charting the path ahead.

The plight of the NIS is but one example of the delinquent and irresponsible stewardship of the PPP/C. It must work now in a good faith manner with all stakeholders to help retrieve the situation.

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