Having listened to the most recent Teachers Talk radio programme on the National Insurance Services (NIS), I couldn’t believe the things that I heard. These things were never mentioned in the recent ministerial statement or in previous consultations held by the NIS. Surely, these things could not be true; surely, the assertions were incorrect; surely, these were lies to be used for political mileage. To my surprise, all that was said was indeed true and was verified by NIS annual reports, audited statements, and the 11th actuarial review.
Here are some of the key findings from the NIS Annual Reports with it audited financial statements (2017-2021) and the 11th Actuarial Review. Below are some of the main findings that were conveniently omitted in the ministerial statement and NIS consultations.
- Management fees for the NIS increased by 186% from 2017 to 2021, while the maximum amount a pensioner can receive per month has been $2,599.80 since 2006. The wage ceiling used in the calculation of one’s pension has not increased since 2006 (only Montserrat has a lower wage ceiling), while NIS management fees increased by 186% in 4-5 years. See Table 1 below for a year-by-year summary of the management fees.
|Year||Management Fees ($)|
- NIS administrative costs are considered high by the actuary and need to be significantly reduced. Only Anguilla and Montserrat have a lower cost ratio than St. Vincent and the Grenadines (SVG). St. Lucia, Dominica, Grenada, and Antigua and Barbuda have lower administration costs than SVG. See Table 2 below for a year-by-year summary of the ever-increasing administrative costs to run the NIS.
|Year||Administrative Fees ($)|
- The independent auditor (KPMG) indicated in the 2020 NIS financial report that the NIS should reduce its discretionary expenses. While there was no description of what constitutes discretionary expenses, they are defined as costs that are not essential to the running of the NIS. Are these discretionary expenses equal to the $50 million issued to non-contributors to the NIS? A dialogue with a senior member of NIS management indicated that monies spent on students who are successful in CSEC and CAPE can be classified as discretionary expenses.
- 50% of NIS investments are in the SVG public sector. The Government of SVG (GoSVG) has 50% exposure to the NIS (see page 13 of the 11th actuarial review), contrary to the 13% stated in the ministerial statement. The actuarial review indicated that 50% is high and above the carefully considered benchmark of 20%.
- According to the actuarial review, the investment committee of the NIS needs to be changed, and this is termed a high priority. The review said that the change should see two of the three Cabinet-appointed board members removed and replaced by two non-board members with investment, business, or financial experience. The actuary said this change would enhance the independence of the committee. In addition, the actuary indicated that the investment committee chairman should be separated from the chairman of the board (see pages 5 and 41 of the 11th actuarial review).
- Loans and Advances are extended to staff of the NIS. Here is Table 3, showing the amounts from 2017 to 2021. What is the rate of return on this loan? How does this loan and advance benefit the sustainability and benefits adequacy of the
|YEAR||Staff Loans and Advances ($)|
- The actuarial review indicated that the following risks could reduce NIS funds sooner than projected:
- If NIS does not reduce its administrative expenses,
- If NIS does not invest better,
- If the Government is unable to repay bonds or loans on time.
Sadly, none of the things mentioned in this written piece were highlighted in consultations held by the NIS or in the recent ministerial statement read by the Minister of Finance. The convenient omission of these findings hints at a lack of transparency and creates distrust in the NIS. The contributors and people of SVG are expected to increase their contributions, wait longer to get early-age pensions (from age 60 to 62), and wait longer to get full-age pensions (from age 65 to 67), while the NIS invests in discretionary expenses, invests in social programmes that do not contribute to the sustainability of the NIS, offers loans and advances to NIS staff with contributors’ money, and increases their management fees and administrative costs on a frequent basis.
Based on the information provided and available, can the NIS be labelled as a social welfare program, a country club for the management of the NIS, or a people-cantered social insurance program? You decide.
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