NIS registered $6.8B income in 2001
Investment returns down sharply this year
Stabroek News
September 30, 2002

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Last year the National Insurance Scheme (NIS) registered income of $6.8B but interest income is sharply down this year because of falling returns on government paper.

In an advertisement yesterday to mark its 33rd anniversary, General Manager Patrick Martinborough said that interest income from investment between January to July 2002 was $462M compared to $1,048M for the corresponding period last year. “That significant decrease was due almost entirely to the interest earned on treasury bills which moved from a height of 12.1% in January 2001 to 8.1% in January 2002 and then to 4.7% in July 2002”, he disclosed.

He noted that the need to protect the fund against inflation could not be over-emphasised and great care had to be taken in relation to investment strategies to ensure a healthy interest rate so that the NIS fund could experience real growth. The fund at the end of July 2002 stood at $20.3B.

The income of the scheme is mainly derived from contributions. Minister in the Office of the President with responsibility for finance, Saisnarine Kowlessar, pointed out in the ad that of last year’s $6.8B income, $5.1B came from contributions from employers and employees. In turn, the scheme paid out $3.9B in benefits and the minimum old age and invalidity pension was increased by nearly 10 percent. After revision in 2001, the medical care benefit rose from $600,000 to $760,000 and is now $801,800 per claim.

Martinborough noted that for January to July 2002, contributions from employed and self-employed persons totalled $3,357.8M, an 11 per cent increase over the corresponding period last year. An increase in the insurable income ceiling from $76,000 to $80,180 effective from February this year was seen as the main contributing factor. The number of benefit claims paid out between January and July 2002 was 68,646. This was a decrease of 14.5 per cent over the 2001 period.

The total paid out as benefits over this period was $2.4B compared to $2.5B for 2001.

“Persons who would have paid contributions at a higher rate based on the increase in the insurable earning would have been entitled to higher benefit amounts. The ceiling of medical care was moved from $760,000 to $801,800 per claim, solely because of the change in the insurable earnings ceiling”, Martinborough pointed out.

He disclosed that during the year, the NIS began outsourcing data entry of its contributions records for the period 1989 to 1998. The project is expected to be concluded by August next year. “At the end of the project it is expected that contribution information for all contributors would be in our computer data base. Once this is achieved the time taken to process long term benefits (pensions) would be significantly reduced”, the NIS General Manager asserted.

He contended that 33 years on, the NIS is now about to face its greatest challenge: the modification of its programmes to meet changing demands. This is happening all over the world in social security systems driven by factors such as the decrease in fertility rates, extended life expectancy, ageing of the population, the HIV/AIDS scourge and improvements in medical science.

Martinborough said that the recent practice of some large employers to contract out jobs that were traditionally done by employees of the company “has been of great concern to the Scheme and efforts are being made to have this practice addressed publicly”. He lamented that the self-employed population remains elusive. He said the Scheme intends to continue efforts to ensure that all self-employed seek the protection of the scheme before it is too late.

Kowlessar said that the policy of diversifying the Scheme’s portfolio and ensuring the highest returns on investments has continued. He noted that the Scheme has extended loans to some private entities at rates in excess of the deposits and savings rates at banks and has concluded a “favourable agreement” with the government for the construction of the CARICOM Secretariat.

Contending that as a service-oriented organisation the Scheme must deliver world class service, Kowlessar said that to do this the NIS “will have to re-engineer its processes and methods to deliver a better-quality product... I am happy that the Scheme is conscious of this fact, as evident from the completion of a major computer-networking project that has linked the main office in Georgetown with branches in other parts of the country”. He posited that this would lessen the time to process claims which was a recurring irritant. He added that management’s decision to provide an annual statement of contributions made by members to the Scheme is a vital step in the reconciliation of the records of the Scheme and those of employers/employees.

He added that the NIS should aim to institute a “Covenant of Service” in the near future that establishes the standards and practices through which the public could measure its performance.

Chairman of the NIS, Dr Roger Luncheon noted that several problems remain. Among these was arrears contributions which he said had reached crisis proportions. He pointed out that the social partners have called for reforms that would include the provision of benefits for paediatric care, health care for pensioners and unemployment benefits. He noted that the mandated actuarial review of the Scheme is to soon start and the social partners would be brought together to conclude discussions on suitable terms of reference.