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Social Security Fund Could See Reform and an Increase in Contributions as early as 2023

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by Kevon Browne

St. Kitts and Nevis (WINN): Reserves in the Social Security Fund of the Federation are projected to be depleted in 2040 if the contribution rate is not increased and benefit reforms are not made according to the St. Christopher-Nevis Social Security Board’s 13th Actuarial Review.

The report suggested that after the reserves have been exhausted, there would be two possible sources of income to meet benefit payments: higher contributions and special transfers from the government.

The report also suggested that total expenditure is expected first to exceed total income between 2022 and 2027, and the Fund is projected to be depleted between 2038 and 2043.

Recommendations in the report suggest an increase in contributions to 13 percent by 2024 and an increase in the pension age to 65 by 2024.

Similar projections were made in the final draft of the 12th Actuarial Review published in March of 2019 before the pandemic hit.

Since the pandemic, unemployment rose because of the halt of our economy’s tourism, entertainment and construction sectors. The Social Security Board supported the Government’s rollout of stimulus packages.

The Minister responsible for the statutory body, the Hon Eugene Hamilton, explained how in his address to mark the 44th anniversary of the institution saying, “A major show of solidarity in 2020 was the initiation and rollout of the COVID-19 ReliefFund, where over 8500 persons were provided with the COVID-19 grants to the tune of over $23 million.”

What is the likelihood of social security contributions and pension age increasing over the next two years?

WINN’s news team asked that question of Minister Hamilton, and he had this to say:

“The likelihood of those two things happening is dependent upon the decision of Cabinet ultimately, but the recommendations by the actuary and the management committee looking at all of the circumstances will be recommending based on my discussions with them that some of those reforms be implemented. Reforms could include the age of retirement moving from 62 over time to 65, or higher and also the level of contributions may very well change based on the recommendation of the management as well and the actuary himself,” said Hamilton.

“In fact, it is not the first time the actuary is making those kinds of recommendations. He has made those recommendations in the previous report. So yes, that is a likelihood; that depends. And it may very well be that we have to do it now… we can’t kick the can down the road all the time. That is because whatever we do now has an impact on the life, the longevity of the Social Security and it being able to pay the benefits to all those who may qualify for benefits in the years to come.”

Even with the Minister saying that there could be an increase in contribution and pension age, he said there is no need for alarm given the past projections made by the actuary.

“The eighth actuary report, which was reporting at the end of 2005, projected a depletion of funds by 2052. And then the next actual report, the ninth, which was reporting at the of 2008, projected that it had come down from 2052 to 2043. The 11th, which was reporting for the year 2014, projected that it was down to 2041. The 12th was also consistent by saying it’s down to 2041. The 13th to which you referred has now projected that it would be by 2043. In other words, the fund, based on its projection, has gained two years under the last review. So it’s [nothing alarming or] nothing negative happening on Social Security. I would describe that as positive that the fund has gained two years in the projection by the actuary.”

At the end of the exclusive with WINN, Hamilton said that a decision must be made soonest to protect the longevity of the Fund.

“We have to make decisions/recommendations so that the life of the fund can be extended. Those recommendations link back to the first question you asked, which is whether there will be more contribution required from contributors; that’s a likelihood… Whether the pension age will change from 62 to another age 63,65, 67, that also is a likelihood. All of those things give life to the Social Security extend the years of Social Security. And so, any of them, or maybe a combination of them, is likely as the years go by, whether it is next year, year after next, next three, four, five years. What I will say is, the longer we stay to make those reforms, the greater will be the urgency, and maybe demand on funds to be able to project life into Social Security.”

See the full report here: https://socialsecurity.kn/publication/13th-actuarial-review/.

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