DAYS ahead of next Monday's budget day, a new report by the National Insurance Board (NIB) looks set to reignite debate on the vexed question of the retirement age. The report said last year a deficit in the National Insurance Scheme (NIS) had to be plugged with funds, variously quoted as $1.259 billion or $1.36 billion.
Almost all NIB earnings were used to plug a billion-dollar deficit between contributions it received and benefits paid out to recipients, mostly pensions.
This alert was spelt out in NIB Annual Report 2022, recently laid in the House of Representatives.
The deficit worsened over the past five years (from 2018 to 2022) successively from $226 million (in 2018) to $432 million, $664 million, $1.024 billion, and finally $1.198 billion (in 2022). A bar chart shows the trend of a widening deficit got significantly worse in 2020.
While contributions had been fairly stable at about $4.7 billion, from 2020 to 2021 they fell by $165 million (from $4.685 billion to $4.510 billion).
Worse yet, at the same time, the steadily increasing benefits paid out then leapt by $360 million.
Things overall got no better last year, as some $20 million more in contributions to the NIB was gobbled up by a $174 million jump in demand in benefits paid out.
The report said, "Demographic factors continue to impact the NIB, highlighted by an increasing beneficiary base and shrinking contributory base."
Since 2013, benefits paid out have exceeded contributions received, the report said.
It said last year's shortfall of $1.198 billion was "an increasing and concerning trend."
The report said the NIB's total investment income that year of $1.259 billion was utilised in financing this shortfall.
By June 2022, the NIB investment portfolio fell by nearly three per cent to $29.04 billion, some $786 million less than a year before.
NIB blamed the decrease in the fund's value on $598 million in unrealised losses plus "the withdrawal of $1.36 billion to finance the NI System deficit."
The report said the global economy had struggled in 2022, amid the Russia-Ukraine war and related events worsening inflation and global economic activities.
The executive director remarked the NIB has completed its 11th Actuarial Review, to be sent to the International Labour Organisation (ILO) in the new fiscal year.
"Additionally, we partnered with the Ministry of Finance and other key stakeholders in sessions to discuss the recommendations included in the 10th Actuarial Review, particularly the proposal to introduce early retirement reduction factors for persons retiring before 65.
"These stakeholder engagements are in line with one of our strategic objectives and are increasingly pertinent as TT continues to experience the effect of an ageing population, which is challenging the sustainability of the NIS."
The report, in a section titled Long-term Benefits, said almost 87 per cent of benefits paid were long-term benefits – retirement pension, retirement grant, invalidity benefit, and survivors benefit – to the tune of $
