24.1 C
Friday, July 12, 2024
HomeNewsLocal NewsSocial Security reform was the major topic at the statutory body’s stakeholder...

Social Security reform was the major topic at the statutory body’s stakeholder forum


by Kevon Browne

St. Kitts and Nevis (WINN) – The longevity of the Social Security Fund in St. Kitts and Nevis has been questioned over the past decade.

The fund is now in its 45th year of operation, and reforms are needed to ensure another 45 years.

According to the Actuary Derek Osbourne from Life Works, a fund that has amassed $1.7 billion in reserves may be depleted by the late 2030s – early 2040s without stringent reforms.

“On the current trajectory, as is designed today with the contribution at 11 percent and the benefit rules that we have in place today [the fund] is certainly not sustainable.”

Osborne reported no crisis for the fund, but if there is no action now, the fund could be in crisis in about 20 years. 

“There’s today. The fund is still relatively strong. You have the second largest fund in the OECS… back in 77-78, when the fund was first started, two great decisions were made here in St. Kitts and Nevis; those schemes that had NPF before most of them reduced the contribution rate and left the age the same. Here in the Federation, you increased the age from 60 to 62, and the rate was kept at 10 percent. And that is why the fund is so large compared to St. Vincent and Grenada and Dominica and others.”

Investment income filled some of the gaps, but in 2022, for the first time, total income was less than total expenditure, and now Social Security is at a point where it is dipping into its reserves to meet the demand on the fund. However, investment also needs some diversification.

“So, what we have is that we have a very heavy concentration of investments in one currency, in one small island or Federation – 50,000 people – and a lot of it one single bank and a lot of it politics in one type of instrument, short term deposits which is not appropriate for long term pension funds and that’s why we have that falling interest rates last year.”

As reported, the statutory body is spending 16 percent of wages but only collecting 11 when looking back at 2022.

As it stands, the reserve will continue to shrink as the expenditure increases. 

“There are three keywords that we look at when talking about the future – we need to have adequate benefits to ensure that people can lice. We need to have affordable contributions to ensure that employers and workers can afford what it takes to provide those benefits, but at the same time need to have a system that is sustainable. When we think about those three things, affordable benefits is going to come with a price. So the more you want as a benefit, the more it’s going to cost as a contribution. Of course, employers don’t want high contributions, workers don’t want high contributions, so we have to balance the two, and you also have to think about the future and sustainability.”

Osborne continued, “what we’re trying to avoid in the whole program going forward is, of course, the fund never being exhausted – that’s number one. The second thing is not having to charge your children and grandchildren double or triple what you’re now paying and them getting less. As you see what’s going on in Barbados today, the rate is 181/4 percent when you’re now paying 11 percent, and they may even go up in Barbados, given the state of their fund. And the third part I mention – the self-employed people – we really should be concerned about more and more self-employed people not having an income in old age.”

Some of the recommendations for reforms:

  • Changing the pensionable age from 62 to 65 or 67
  • Change from an aged pension to a retirement pension.
  • Increasing contribution from 11 percent with the actuary referencing other Caribbean Islands who have contributions between 15-18 percent.
  • The statutory body has to diversify the way it invests its reserves.
  • Set guidelines to ensure reforms and recommendations are acted upon to make sure the fund adapts to changes in society.
  • Changing how self-employed contributors pay their contributions
  • Updating the design of the fund to reflect what is needed for the time
  • Advancements in technology to make operations more accessible 
  • Implementing ways to reprimand employers who are not compliant

“Right now, we’re working on four policies within the organisation to set those guidelines, set those targets and set those priorities and responses. So there’s a benefits policy. I mentioned it’s been 45 let’s review the benefits. Make sure they are relevant today. The funding policy – do we want the fund to be at least sustainable for 30 years, [or] 40 years? Reserved never falls below three or four times expenditure? What is our target? Where do we really want to see ourselves 20/30 years from now? A risk Policy – We talk about risk all the time, and what we need to do we do when things happen. COVID happens, hurricanes happen, [and] people try and steal from the system. We need to find ways to react and respond to things that could go wrong. An Investment Policy – a lot of the eggs in one basket. We need to find a way to gradually move those monies out of those short-term deposits into longer-term instruments with some hopefully outside of Federation.”

Prime Minister Drew said the government is willing to do what is necessary to secure the longevity of the Social Security Fund.

“I think for a number of years, there have been mentioned of [people] who would have spoken to the fact that the reforms might be tough, and some have kicked the can down the road, and I’m seeing the can in front of me now. And the question the stakeholders are asking – what is Dr Drew and the Government going to do with the can? But I want to say from the onset that we have said what we will do – that we will make necessary reforms so that Social Security can remain strong, viable and a term they use, solvent. And that is why I said it needs political will. But political will cannot [do it alone]; it needs your buy-in and your understanding – and hopefully, when the Actuary would have presented to you, he would have convinced you as to why the reforms are necessary. And then I alone or the government alone, or with Social Security Board would not have to be the ones out there saying that reform is necessary and needed. But when you go back to your respective organisations, you will bring the message that we definitely need reform.”

The review of the St. Christopher and Nevis Social Security Board’s 13 Actuarial Review and Stakeholders Breakfast Forum was held on February 21 at the St. Kitts Marriott Resort.


Most Popular

Contact a Program
If you are interested in a program or advertising, send us a message.
Send Message
Signup for our Newsletter
We'll only be in touch when we've something exciting to share.
We never share your details
No thanks