By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The National Insurance Board (NIB) must be given more independence from government, a pension specialist urged yesterday, adding: “Successive administrations have let the youth and successor generations down.”

Larry Gibson, chief operating officer of CG Atlantic Pensions, who has long advocated for comprehensive pension and social security reform in The Bahamas, told Tribune Business that it was impossible to avoid such conclusions given that the need to implement critical reforms at the country’s only social security scheme has been known for more than two decades.

Suggesting that “inertia”, and a failure to act, by both political parties has left NIB on the brink of a crisis, he argued that The Bahamas “doesn’t have the luxury” of further delaying contribution rate increases and other changes until the economy fully recovers from COVID-19. That was the stance adopted by Prime Minister Philip Davis when the reform issue first arose last year.

And, speaking after it emerged that NIB’s current Board has added its voice to those calling for a contribution rate increase, Mr Gibson told this newspaper that governance reforms - which would make the scheme more autonomous and less prone to use as “a kitty” employed to finance pet government projects - were a little-discussed aspect that also needs to be prioritised.

“To be honest, if they could get the Government out of it and put it in some sort of independent body, headway can be made,” he said. “We need greater focus on the cost of running NIB. We need more long-term planning, and not a funding mechanism or kitty for the Government.

“It really needs to have a much higher degree of independence from the Government in its day-to-day operations and affairs. But nobody is discussing this. That conversation is never had. It’s really been used like a development bank in terms of funding the Government’s policies and projects and what have you.”

NIB’s Board, echoing the social security system’s 11th actuarial review, was this week said to have recommended to the Davis Cabinet that contribution rates be increased by between three-quarters of a percentage point and 1.5 percentage points from January 1, 2023. That would have raised the combined rate to between 10.55 percent and 11.3 percent, but the Government did not approve it, so the Board is now awaiting a move come July 1, 2023.

Many observers, especially following the 11th actuarial review’s publication, have viewed an NIB contribution rate increase as inevitable, the only questions being the timing of the move and by how much. The Davis administration, following its predecessors, has sought to hold off as long as possible but the delay will only make the magnitude of the correction greater.

Mr Gibson told Tribune Business: “You could kick the can down the road, but the can is against the wall. All you’re doing is bending the can. I was in the food store the other day, and I saw a colleague of mine. He reminded me that we were on some sort of committee in 2004, had exactly the same conversations [on NIB’s problems] then and absolutely nothing has happened since.

“It was the same issues, same recommendations but successive governments have, on the NIB question, you’re going to have to conclude that they have let the youth and successor generations down. It ain’t for lack of knowledge of what to do. It’s total inertia going on for 20 years.

“Twenty years on from all the analysis and work and review, the only thing we get out of it is that you are 20 years older and nothing has changed. No government seems to want to do anything; a large amount of inertia by successive governments.”

The International Labour Organisation (ILO), in the 11th actuarial report on NIB’s solvency and sustainability, warned there is no choice but to immediately increase contribution rates beyond the existing 9.8 percent otherwise the country’s future may be endangered by the chronic underfunding.

It called for a two percentage point increase in the current NIB contribution rate, split 3.9 percent/5.9 percent between employee and employer, to be implemented from July last year. That recommendation, too, was never taken up by the Government, with the report calling for a series of rolling rate increases every two years through to 2036 to help stabilise and shore up NIB and its $1.5bn reserve fund.

Mr Gibson said the latest actuarial review was likely to be saying nothing different from the third and fourth reports, plus the version that was presented to Mr Davis almost 20 years ago when he was NIB chairman. “We need to bite the bullet and not delay it any longer,” he added of the reform need.

“Yes, these are tough times, these are inflationary times, but you’re going to have to do it. At least you can do it at a time when there is some bounce back in the economy, Look at it that way. We’re coming back from a very swift and deep contraction in the economy but there’s so much more work to be done. Let’s not fool ourselves.”

Describing NIB as an “essential safety net”, Mr Gibson said The Bahamas could not allow it to fail because of the dire financial and social repercussions that would occur for thousands of Bahamians, especially those who have retired, as there is nothing that could fill the void it would leave behind and replace it.

However, an NIB contribution rate increase in 2023 would likely be especially ill-timed for multiple businesses given that they are already struggling to absorb numerous cost increases all set to strike at once - particularly soaring Bahamas Power & Light (BPL) bills where the fuel charge is set to peak at a level 163 percent above its formerly-hedged figure this summer.

Peter Goudie, head of the Bahamas Chamber of Commerce and Employers Confederation’s (BCCEC) labour division, said: “I think people are going to have to try and cope as best they can and, if necessary, just cut back. We’ve got all these costs and inflation on top of it. I don’t know how well people are going to survive, but they’re going to have to cut back if need be.

“The biggest issue is going to be the BPL increase. It’s just horrible...... The Government has got to deal with this, though. You cannot have NIB run out of money. It just hurts so many people, especially seniors that don’t have the ability to work any more. I think it’s going to be a very rough year. Everything is coming at the same time.”