The private sector is calling on government to consider its list of proposals for the revival of the National Insurance Scheme (NIS) in the wake of its Chairman’s dire summation of the state of affairs in the social security organisation.
The Private Sector Commis-sion (PSC) in a position paper last year said that to bring the NIS back from the brink, there must be “a thorough review of all operational procedures and practices with a goal of making each more efficient by using all available tools and technologies; immediate steps to upgrade or source a new Information Technology system; enforcement of penalties for late or non-payment of contributions and introduction of legal measures such as levying on the income and assets of non-compliant employers; the crafting of an appropriate investment framework to replace the current one; priority given to how funds are invested, liquidity and preservation of capital rather than the rate of return; the publishing of annual audited financial statements and periodic actuarial reviews; the setting up of good governance practices in line with those of the International Social Security Association; and the taking of potent measures to lower administrative costs.”
President of the Georgetown Chamber of Commerce and Industry (GCCI) Clinton Urling has reiterated the Chamber’s endorsement of the PSC’s position on NIS and what must be done to salvage it.
“The PSC in that document had some reservations on some aspects of the actuarial report,” said Urling. “One of the things I believe is that on the collections side of things we should consolidate the NIS operations to that of the GRA and have one integrated management information and collections system,” he suggested.
“Also, government should be prepared to reimburse or act as guarantor to NIS for any investment made by the entity which fails or provides a lower rate of return than that which was invested,” he said. “I say this because a major part of NIS’ woes is as a result of the Clico debacle in which NIS held significant financial investments. If there is no government guarantee then the funds should be left alone or invested as bank deposits or government bonds where a more reliable rate of return exists,” he said.
Meanwhile, former Chairman of the PSC Ramesh Dookhoo believes the NIS is partly to be blamed for the predicament in which it finds itself since it has not been enforcing the law as rigorously as it can to ensure that employers pay up.
Speaking in the wake of Chairman of the NIS Dr Roger Luncheon’s recent revelations of the scheme being in dire straits, Dookhoo said, “Either they are not enforcing the law or they are not ensuring companies register.
“What has happened to the role of the Inspectorate? The NIS cannot expect people to turn up. It is not a voluntary scheme. Who is monitoring collections? Why are they not going after people? I think it is an issue of management.”
Dr Luncheon, on the occasion of the Scheme’s 44th anniversary said that a parallel in Guyana must provide for a long-term solution that revolves around two main thrusts: a. significant expansion in the population of contributors and increased contribution rates and b. managed growth in benefit expenditure particularly pensions.
The 8th actuarial report of the NIS was blunt in its 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.
Luncheon said that while it is exaggerated to say that the situation at the NIS is imminently dire, the scheme’s financial viability does evoke apprehension among the informed. He noted that the scheme’s expenditure growth continues to outgrow revenue growth.
Contribution income was $11.32 billion in 2012 while benefits expenditure, the main item of expenditure was $11.33 billion. Luncheon pointed out that long term benefits dominate the benefits liability with over 43,000 pensioners in payment at July, 2013. He said that at the end of 2012, the active population of the employed contributors totalled 117,219 while the active population of the self-employed was only 8,791.
He said too that efforts to get the self-employed enrolled have produced negligible results. “The self-employed situation of anomaly is evident in the face of the size of parallel economy in Guyana,” Luncheon said in his message to mark the 44th anniversary of the scheme.
Luncheon made the point that the solution to NIS’ woes must include increased revenue collection and controlled expenditure growth. It is unclear whether this means increasing rates for contributors while scaling back on the payments of benefits.
He pointed out that in the 2013 national budget, the Minister of Finance, proposed an increase in the contribution rate for both employed and self-employed to 14% and 12.5% respectively but this did not significantly reverse the deficit.