After being supplied with a copy of the 10th Actuarial Review from an individual, I delved into it and compared its contents with those of the 11th Actuarial Review. I would like to present some comparisons for the reader’s attention. This piece will focus more on administrative costs. To see the overall annual cost of administrative expenses, please click here. In 2014, administrative expenses were EC$10,327,540 and EC$12,557,942 in 2021. Please see Table 1 for a more detailed breakdown of the administrative costs.
Table 1: General and administrative expenses from 2014-2021
Year *Salaries and Wages $ Professional Fees $ Management Fees $ Accommodation and Travel Expenses $ Annual Dinner and Anniversary Celebration $ Donations, Community and Education Projects $ 2014 4,156,478 80,666 123,739 304,785 50,259 498,593 2015 4,447,639 171,120 276,952 353,872 45,429 1,001,701 2016 4,839,211 106,440 351,395 323,673 79,657 672,858 2017 4,839,211 131,047 450,706 169,747 95,307 588,100 2018 5,158,777 60,794 755,173 282,714 10,450 788,764 2019 5,484,433 196,899 738,048 307,831 17,100 591,489 2020 5,297,118 148,039 1,027,677 58,612 48,499 1,399,339 2021 5,452,955 378,450 1,294,084 21,672 21,736 701,730
*The figures for salaries and wages do not include retirement benefit plan contributions, staff training and uniforms, or medical insurance contributions.
One of the four primary objectives of the National Insurance Services (NIS) is administrative efficiency. According to the 11th Actuarial Review, administrative efficiency addresses how well the NIS keeps operating and management costs low while delivering quality service. During the period from 2014 to 2021, admin costs rose by 22%. This raise is alarming due to the following:
- On page 2 of the 10th Actuarial Review covering the period 2014 to 2016, it was stated that “steps have been taken to gradually reduce admin costs by controlling donations and managing staff related costs”. Interestingly, donations, community and education projects have increased during the election years of 2015 and 2020. From 2014 to 2015, the amount allocated increased by more than 100%, and from 2019 to 2020, it increased by 137%.
- Both the 10th and 11th Actuarial Reviews recommended that the NIS reduce their admin costs. Despite these sensible and repeated recommendations, admin costs continue to rise and were up to EC$12,557,942 in 2021.
- Both the 10th and 11th Actuarial Reviews stated that the NIS in St. Vincent and the Grenadines (SVG) is one of the most expensive to operate in the Organisation of Eastern Caribbean States (OECS). Antigua and Barbuda, St. Lucia, Dominica, and Grenada operate in a less cost-effective manner than the NIS in SVG.
- In the NIS 2017 annual report, it was stated that the admin costs were considered high. Additionally, the report indicated that the level of admin costs needed to be managed as they had the potential to worsen the NIS finances. The 11th Actuarial Review warned of rising admin costs being a factor that can make the NIS fund deplete quicker than projected.
Essentially, the NIS needs reform. These changes should be equitably spread across the contributors and the NIS. For contributors, a 0.5% annual increase in contribution rate (0.25% per employee and 0.25% per employer up to the year 2034) should be satisfactory and take into consideration the high cost of living. Additionally, the reduction of the accrual rate from 60% to 55% is reasonable.
However, other changes need to be included. One such change is to reduce the admin costs from EC$12 million to EC$7-9 million, in harmony with the actuarial review. If the current director is not capable of such steps, then maybe there is a need for someone else to ensure that operating costs remain low and in keeping with the primary objective of administrative efficiency, as the millions of dollars saved in administrative costs can be invested to generate greater returns and reduce the likelihood of the funds depleting quicker than expected.
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