KINGSTOWN, St. Vincent — National Insurance Service (NIS) insiders have requested that Opposition Leader Arnhim Eustace keep the plight of the social security institution, which is in need of restructuring, on the front burner of national discussion.
“I don’t want to tell any tales out of school but I myself, from time to time, I have received messages indirectly telling me keep the pressure on. I won’t tell you from whom,” Eustace, a former chair of the board of directors of the NIS, said at a press conference last week.
NIS profits have fallen from EC$27 million in 2008 to EC$5.6 million in 2010 and the latest actuarial review, completed in 2008, shows that unless the 8 per cent contribution rate is revised, the NIS will not have enough money to cover its expenses after 2016.
The institution is at risk of losing the EC$62 million it invested in the failed British American Insurance Company and CLICO even as NIS reserves will start falling in 2027, and will disappear by 2040, according to the 2008 review.
Eustace, a former minister of finance, said that the NIS needs to be reformed and the options included increasing worker’s contribution, which now stands at 3.5 per cent of income, increasing the employer’s 4.5 per cent contribution and increasing the retirement age.
Prime Minister and Minister of Finance, Dr. Ralph Gonsalves, has also spoken of the need to reform the NIS.
In his Budget Address this month, Gonsalves detailed some challenges to the NIS and Public Service pension arrangements.
Gonsalves said that the NIS cash flow will turn negative this year but added that his government would outline its plan of action in next year’s budget since the necessary studies will not be completed this later this year.
Eustace said that the NIS must operate with three considerations in mind: its money must be safe; there must be liquidity, that is, money must be available to pay pensions; and, there must be yield — money earned from investment.
Eustace blamed the Unity Labour Party administration for the current state of the NIS.
“For years, I have been issuing warnings to the government that the NIS had to operate with the three main considerations,” Eustace said.
“And they are not doing that now. And for the last few years, they have not been doing that and that results in the present situation we now have,” he further stated.
Eustace said that he was “quite sure” that the NIS consults with Gonsalves before making any major policy decisions.
He noted that government institutions borrow from the NIS, including National Properties, the holder of the largest such loan from the NIS — EC$50 million.
Eustace said that when he was chair of the NIS and later minister of finance, he had to get involved in the actuarial review to understand what was going on in the NIS.
“So, there is no separation that is so distinct that the prime minister is not involved,” he said.
“I remember when I was chairman of the NIS, [then prime minister] Sir James Mitchell approached me to borrow EC$15 million for bananas. I asked him one question: ‘Who going to pay the loan?’ He couldn’t answer; that was the end of the matter. The NIS has to be run on strict principles,” Eustace said.