KINGSTOWN, St. Vincent – The Office of the Press Secretary of the Prime Minister’s Office on Thursday issues the following notes to the media on National Insurances (NIS) pensions and issues relating thereto.
Informational Notes For Media On Age Benefits AT NIS
1.0 Background
The NIS was established in St. Vincent and the Grenadines by Act#33 of 1986. Its primary purpose was to collect contributions and pay benefits to eligible persons. The NIS provides benefits under three main categories, namely, long-term, short-term and the employment injury. Long-term benefits include age benefits, invalidity benefits, survivors benefit and funeral benefits. Short term benefits are sickness and maternity benefits and Employment injury covers benefits payable as a result of an injury on the job.
Pursuant to Article 17 of the National Insurance Act, the NIS is mandated to conduct an actuarial review every three years. The main purpose of the review is to assess the actuarial and financial state of health of the NIS and make specific recommendations to preserve the social relevance and financial viability of the plan. To date, seven such reviews have been conducted and all revealed that the NIS is in a good actuarial and financial condition.
2.0 Age Benefits
According to SR&O # 13 of 1994, an age benefit is payable to an insured persons who reaches the age of 60. The age benefits comprise of either an age grant or an age pension.
2.1 Full Pension
An insured person may qualify for either a reduced pension or a full pension.
To be qualified for a full pension, the following criteria apply:
- Has attained the pensionable age of 60 and
- Has paid or been credited with at least 500 weekly contributions of which at least 150 weeks were actually paid.
The amount of benefit payable is dependent on the number of contributions made and average insurable earnings in the best three contribution years of the last 15 years. For instance a person who retires with 500 weekly contributions (10 years) will be eligible for a pension of 30% of his average weekly insurable earnings. For every additional year of work beyond the first 10 years, an insured person would be eligible for an additional 1% up to a maximum of 30%. Therefore, the maximum pension rate that a person may receive is 60% (which can be attained in year 2027).
2.2 Reduced Age Pension
In an effort to enable older workers to receive a pension in the early years of the plan, there was a provision in the Act to accommodate a reduced age pension. The reduced age pension was applicable to workers who were 37 years or older on the 5th January 1987 (date on which NIS was established in SVG).
- To be eligible for this pension, an insured person must have;
- Attained age 60
- Paid at least 150 weekly contributions
In addition, the insured person should have paid or been credited with an extra 25 weeks of contribution for every year of age that they were under age 50.
As per recommendation of the fourth actuarial review, which was approved by then Minister of Finance, Mr. Arnhim Eustace in 1999, the Actuary stipulated (or recommended) the following minimum qualifying weeks for a reduced pension as 150 contributions from years 1987 to 1997. For each year between the years 1998 to 2010, the minimum requirement for a reduced pension should be increased by 25 weekly contributions respectively, up to a maximum of 475 weekly contributions. This was enacted by SR&O 13 of 1994 (gazetted on 23rd of August 1994). Consequently, the reduced pension was phased out fully in 2011 since the minimum contribution requirement for a pension was 500 weekly contributions ( consistent with the requirement for a full-pension). Throughout the Caribbean, and in the US, ten years of contributions is the minimum requirement for age pensions.
2.3 Age Grant
An age Grant is payable to an insured person who satisfies the following requirements:
Attained age 60
Paid a minimum of 50 weekly contributions
Has not met the contributions requirements for an age pension.
The amount of age grant is equivalent to six times the average weekly insurable earnings for every cohort of 50 weeks paid or credited contributions
3.0 Conclusion
A minimum contribution requirement of 500 weekly contributions for a life-time pension is consistent with international and regional best practices. Lowering the contribution requirements, after 25 years of operations increases the generosity of the plan and threatens its long-term stability. This problem would be more acute for NIS, given that it provides relatively generous benefits and it has the lowest contribution rate in the region.
The NIS is currently undertaking its 8th actuarial valuation in order to determine the financial and social relevance of the plan in the prevailing and forecasted economic and social landscape. It is anticipated that the Actuary would provide a set of recommendations to the NIS to ensure the plan remains actuarially and financially sustainable whilst meeting the income replacement needs of the workers and beneficiaries.
Release issued on June 28, 2012 by the Office of the Press Secretary of the Prime Minister’s Office
(Read also: Eustace wants non-partisan look at NIS pension criteria)