By Professor C. Justin Robinson
Professor of Finance & Principal, UWI Five Islands Campus
National insurance scheme (NIS) reform is currently a hot topic in the Caribbean as many nations confront the viability of their schemes and propose reforms. Social security is essentially about income replacement during events and periods of time when individuals face loss of income. The typical events and periods of time covered by schemes include sickness, maternity leave, employment injury, unemployment and of course retirement. In light of the inevitability of these events and periods of time for most of us, NIS is everybody’s business especially the most vulnerable among us.
All Caribbean countries have a comprehensive NIS providing coverage against all or some of these events and periods of time. NIS offer old-age pensions, invalidity and survivor’s pensions, as well as benefits for sickness, maternity, and employment injury. In addition, a few countries have added unemployment benefits (Barbados and The Bahamas), and partial health benefits (Belize, Jamaica, and The Bahamas). In this, the first article of a three-part series I present data on the design features of the NIS old age pension schemes, the major component of NIS, across Caribbean.
Table 1: Key design features of NIS schemes across CARICOM
| Country | Cont Rate (Private) | Wage Ceiling (pm) | Normal Pension Age | Early Pension Age | # Weeks for Age Pension | Minimum Pension (pm) | ||||
| Local Currency | US $’s | Local Currency | US $’s | |||||||
| Anguilla | 10.0% | $7,500 | $2,809 | 65 | – | 500 | $715 | $268 | ||
| Antigua-Barbuda | 14.5% to 16.0% | $6,500 | $2,434 | 63 to 65 | 60 | 500 | $350 | $131 | ||
| Bahamas | 9.8% | $3,207 | $3,207 | 65 | 60 | 500 | $346 | $346 | ||
| Barbados | 18.3% | $4,880 | $2,440 | 67 | 60 | 500 | $1,052 | $526 | ||
| Belize | 10.0% | $2,253 | $1,127 | 65 | 60 | 500 | $204 | $102 | ||
| BVI | 8.5% | $3,750 | $3,750 | 65 | – | 500 | $260 | $260 | ||
| Dominica | 13.5% to 15.5% | $7,000 | $2,622 | 65 | 60 | 500 | $325 | $122 | ||
| Grenada | 11.0% | $5,000 | $1,873 | 60 | – | 500 | $201 | $75 | ||
| Guyana | 14.0% | $280,000 | $1,344 | 60 | – | 750 | $35,000 | $168 | ||
| Montserrat | 11% to 15% | $4,000 | $1,498 | 65 | – | 500 | $333 | $125 | ||
| St. Kitts-Nevis | 11.0% | $6,500 | $2,434 | 62 | – | 500 | $430 | $161 | ||
| St. Lucia | 10.0% | $5,000 | $1,873 | 65 | 60 | 750 | $300 | $112 | ||
| St. Vincent & Gre. | 10.0% | $4,333 | $1,623 | 63 to 65 | 60 | 500 to 750 | $303 | $114 | ||
| Turks & Caicos | 10% to 12% | $4,000 | $4,000 | 65 | 60 | 500 | $405 | $152 | ||
| Trinidad & Tobago | 13.2% | $13,600 | $2,040 | 60 | – | 750 | $3,000 | $450 | ||
| Source: Mr. Derek Osbourne (Consultant Actuary to several Caribbean Social Security Schemes | ||||||||||
The key design features presented in the table are, the rates contributors are required to pay (contribution rate), the maximum level of income on which contributions are paid (wage ceiling), the ages at which eligible contributors qualify for a full or normal pension and an early pension, the number of weeks persons are required to contribute before they are eligible for a pension from the scheme, the minimum pension for any eligible contributor and the rate used to calculate normal pensions (accrual rate). As can be seen in table 1 there is some degree of consistency in the design features of NIS across the region with noticeable differences in the contribution rates, minimum pensions and to some extent in the wage ceilings.
Table 2 presents basic descriptive statistics on the key design features. The average contribution rate is 11.44% and ranges from a low of 8.5% in the BVI to a high of 18.3% in Barbados. The average minimum pension is US$207 per month but ranges from a minimum of US$75 in Grenada to a high of US$526 per month in Barbados. The average wage ceilings is US$2,338 per month and ranges from a low of US$1,127 in Belize to a high of US$4,000 per month in Turks and Caicos. There is much greater consistency across the normal pension ages, early pension ages and the minimum number of contributions required to be eligible for a pension from the scheme. The differences across the schemes point to the need for a carefully designed and constantly adjusted framework for persons who move between countries for work.
Table 2: Descriptive statistics for key design features of NIS across CARICOM
| Country | Cont Rate (Private) | Wage Ceiling (pm) | Normal Pension Age | Early Pension Age | # Weeks for Age Pension | Minimum Pension (pm) | ||||
| Local Currency | US $’s | Local Currency | US $’s | |||||||
| Average | 11.4% | $ 23,385 | $ 2,338 | 63.8 | 60.0 | 553.6 | $ 2,882 | $ 207 | ||
| Median | 10.0% | $ 5,000 | $ 2,434 | 65.0 | 60.0 | 500.0 | $ 346 | $ 152 | ||
| Minimum | 8.5% | $ 2,253 | $ 1,127 | 60.0 | 60.0 | 500.0 | $ 201 | $ 75 | ||
| Maximum | 18.3% | $280000 | $ 4,000 | 67.0 | 60.0 | 750.0 | $ 35,000 | $ 526 | ||
Any NIS reform programme will likely involve tweaking one or more of these design features and an appreciation of these features is critical for a meaningful discuss of NIS viability and reform. In the next article I will assess the viability of NIS Schemes across the Caribbean based on some widely used actuarial metrics and the final article will lay out some reform options.
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