By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The National Insurance Board’s (NIB) confirmation yesterday that benefit payouts exceeded contribution income by $70m for 2021 shows The Bahamas has “clearly run out of time” to address its woes without inflicting pain.

Matt Aubry, the Organisation for Responsible Governance’s (ORG) executive director, told Tribune Business that the social security system’s affirmation that “more is going out than is coming in” - a state of affairs that has now existed for six years - proves it is “in dire straits” with respect to long-term solvency.

He spoke out after NIB, in responding to social media allegations about property investments, said in a statement: “NIB further advises that while the reserves of the NIB have grown over the life of the Fund and now stand at $1.5bn, the reserves are currently in a state of decline principally because the amount of benefits paid annually have exceeded the amount of annual contribution income received from 2016.

“Given the current structure of the social security programme, the contribution rate and the number of pensioners receiving benefits, this trend will continue, and the differential between benefits and contributions will increase. For the fiscal year ended December 2021, the benefits payments to the public exceeded the contribution income by $70m.”

Mr Aubry said this merely reinforced the need to secure NIB’s long-term viability and sustainability given the thousands of pension beneficiaries, unemployed, sick and invalids that rely on its payments. “It’s in dire straits, and we’re talking 2028 in the short-term and 2030 in the long-term,” he added of the dates for when the $1.5bn reserve fund is projected to be exhausted.

“I don’t think there’s a magical solution. I don’t think there’s a lazy solution. I don’t think there’s anything that we’re going to come up with magically that will take the burden off, but we’ve clearly run out of time to deal with this in a way that doesn’t put people in a state of crisis projection. I think it says it very clearly that there’s a problem, more is going out than is coming in, and that has been going on since 2016.”

The ORG chief said it was vital that the Government get private sector and public buy-in for reforms to rescue NIB as this would make any fall-out easier to accept, whether it involves increasing the retirement age from the present 65 years-old; raising contribution rates; higher hikes in the insurable wage ceiling; increasing the number of contributions before benefits can be accessed - or a combination of all these solutions.

Consulting the public, and developing a plan with their input, would ensure that “when pain points happen they are not seen as put upon”. NIB’s statement comes as the 11th actuarial report on its financial soundness called for a two percentage point increase in contribution rates to be implemented by July 1, with subsequent further hikes enacted every two years until 2036 to secure the social security system’s long-term sustainability.

That July 1 date has come and gone with no rate increase. The Prime Minister, speaking on his return from the Commonwealth Heads of Government summit in Rwanda last week, affirmed his previous stance that the Government will not implement the NIB contribution increase - which would take the overall rate from 9.8 percent to 11.8 percent, split between employer and employee - while his administration explores ways to ease the financial burden this will impose.

Larry Gibson, chief operating officer of CG Atlantic Pensions, and who has long advocated for comprehensive pension and social security reform in The Bahamas, told Tribune Business there are a combination of policy changes that can make saving NIB “less painful” than solely increasing contribution rates for both businesses and workers.

These reform options include raising the “official” retirement age to 67, increasing the contributions required to become eligible for benefits, and further insurable wage ceiling increases. NIB’s present reality was predicted more than two decades by its seventh actuarial review, completed in 2001, which forecast that “reserves are projected to become exhausted” by 2029 if comprehensive reforms are not implemented to stop benefit payouts exceeding contribution income.

“It’s not like the sky is falling in,” Mr Gibson told Tribune Business, despite actuarial projections that NIB’s $1.5bn reserve fund will be totally depleted in just six years’ time by 2028. “There are definite policy prescriptions. We really need to set up for the long-term. What we need is some commitment to work towards them and address it.

“My message is that there are policy prescriptions and it’s going to be a combination of those factors. We need to find a way to somehow decouple these decisions with regard to long-term funding of NIB from the short-day political nuances. It shouldn’t be the prime or only vehicle to fund government projects.

“It’s a strategic investment pool to support NIB’s really core objectives. That’s the social element. It shouldn’t be operating as a Ministry of Social Services or Housing. We need to look at a genuine long-term strategy that is not attached to a government department.”