KINGSTOWN, St. Vincent – A Ministry of Finance economist responsible for pension reform says that Opposition Leader Arnhim Eustace is misinformed on National Insurance Services (NIS) criteria for pension qualification.
Eustace, parliamentary representative for East Kingstown, said recently he will write to the NIS asking for a review of a system he says could disqualify hundreds of Vincentians from receiving pensions
His action, he said, was triggered by a 60-year-old constituent who was told on retiring that her 300-plus contributions to the NIS didn’t meet the 500 threshold and that she would receive a lump sum payment but no pension.
“The impression was given that an individual entered the NIS system under the impression that they had to make 300 payments to receive a pension for life and upon retirement they were somehow told that the requirement is now 500,” Luke Browne, who lost to Eustace in East Kingstown in the 2010 general election, told I-Witness News on Friday.
“It is a clear case of misinformation in the first place and I will tell them (workers) to stay tuned for a statement of clarification on this matter and to assure them that the NIS exists … first of all to meet their material needs, whatever their social circumstances may be,” Browne said.
He, however, added that the NIS must be established “on a firm financial footing” in order to meet the needs of workers
He noted that the NIS was started under the administration of the New Democratic Party, of which Eustace is now president.
He further noted that Eustace, an economist and former prime minister and minister of finance, is also a former chair of the NIS.
“It seems as if he, nonetheless, is still somewhat unfamiliar with the way in which things work,” Browne said.
He explained that the NIS has special provision until the system matures.
“You can appreciate that in 1987, which is the start date of the NIS, a worker who started paying NIS could have been 55, close to the 60 retirement age,” Browne explained.
He said that since such a worker would have begun contributing to the NIS a few years before retiring, there was an initial minimum contribution requirement for such a worker to receive a pension.
But the situation outlined by Eustace in which 300 contributions were required for a worker to receive a pension could not exist in 2012, Browne said.
“The only way in which somebody would have required only 300 payments to receive a pension would have been if they retired in 2003 and started making contribution to the NIS in 1987,” Browne said, adding that from 2011 onward 500 contributions are needed.
“… Mr. Eustace … seems to have been misguided on what the qualifications might be and how to interpret the qualifications.”
Browne, like Eustace, said that in order the to meet the 500 weekly contribution required by the NIS, an individual has to work full-time for ten years.
However, if a worker has made 150 contributions at the time or retirement, the employee qualifies for a full refund of all contributions to the NIS.
A worker who made between 150 and 499 contributions is liable to a one-time lump sum payment.
“Deepening on the life expectancy of that person, it might be more useful than a pension,” Browne said.
“So all categories of workers, whether or not you reach the 500 contributions threshold, would be receiving some sort of benefit in terms of pension or lump sum payments.”
The NIS formula used to calculate the lump sum considers the number of contributions made and the average insurable earnings within a particular period of time.
“There is a technical formula that is applied. It is not as if this person will in any event walk away from the NIS empty handed,” Browne said.
These payments are separate from the fact that a worker who makes at least 26 payments is entitled to a funeral grant of EC$4,330, Browne said.
“So, there are various levels of benefit of which the pension component is only one,” he explained.
“So, if you are really going to assess the NIS to determine whether or not it is really meeting the welfare concerns of contributors, you are not only going to look at the pension component. You are going to look at the maternity benefits, you are going to look at the invalidity benefits — you are going to look at the full range of benefits,” Browne said.
Persons “who have no history of contributing to the National Insurance Services receive some sort of benefit as well” Browne said, noting the non-contributory pension and the elderly assistance benefit.
“Those things should not be discounted. … These things also take care of categories of people who might not be covered for an on-going period because they have not met the minimum number of contribution.”
“The process of pension reform is on-going right now. All matters will be considered going forward. There are very competent professionals working on pension reform and I think their (workers’) interest will be in the forefront of deliberations as well,” he said.
Browne further stated that pension reform here is being approached with a view to balancing the financial sustainability of the NIS and meeting the needs of Vincentians.
Asked if these criteria are clearly communicated to citizens joining the NIS, Browne said:
“Well, the process of education is on-going. … There is always going to be information asymmetries in relation to this. But I think by and large the effort is really made to ensure that people know their entitlements might be given their circumstances.
“But, of course, the NIS could do more and I think the process of pension reform will allow for this to be done in this respect so that you can have a better informed public on this issues,” he further stated.