NIS Sustainability Plan

 

Why are Actuarial Reviews important?

Section 22 of the National Insurance Act stipulates that an Actuarial Review be carried out every three years. (see excerpt below)

(1) The Board shall, with the assistance of an actuary approved by the Minister, review the operation of this Act not later than the end of every third year after the end of the year 1985 and in such review make a report to the Minister on the financial condition of the Fund and the adequacy or otherwise of the contributions payable under this Act to support the benefits payable thereunder, having regard to their other liabilities under this Act.

(2) The Minister shall, as soon as possible after receiving any report made in pursuance of the preceding subsection, lay a copy thereof before the House of Representatives.

 

In keeping with this mandate, since 1983 eleven (11) reviews have been conducted; the most recent was done by BBL World Actuaries in 2016.

 

The purpose of the review is to:

▪ Review the operations of the Fund

▪ Report on the adequacy of the Fund

▪ Recommend timely changes to ensure the sustainability of the Fund.

▪ Ensure that benefits provided are meeting the needs of the population.

 

The Key Findings of the 11^th Actuarial Review are:

1. Starting in 2016, annual contributions are not sufficient to pay for all annual expenditure. Investment income must be used to pay for annual expenditure. The reserve continues to grow.
    
2. Starting in 2022, total income (contributions, investment income and other income) are no longer sufficient to pay for annual expenditure. The reserve starts to decrease.
    
3. During the year 2035, the reserve drops to zero.
    
4. Starting in 2035, the required annual contribution rate to pay for all expenditure becomes 22.5%.
    
5. The reserve-to-expenditure ratio, which is the ratio of the end-of-year reserve over the annual expenditure for the year, moves from 13.0 to 0 between 2015 and 2035. This ratio can be interpreted as the number of years during which annual expenditure can be paid by the reserve if there were no contribution, no investment income and no other income.
   
   
   (The latest actuarial reviews are available for download via the following link):
   http://www.nisgrenada.org/resource-center/downloads

 

Going Forward

Two changes to the current pension system are being proposed:

1. Gradually increase the pension age from 60 to 65 over a period of 13 years. The conditions are:
   
   ►The option to retire at 60 will always be available.
   
   ►Persons who choose to retire before the pensionable age will have their pensions reduced by 1/2% for each month they retire earlier than the Normal Retirement Age (NRA). However, there will be an additional incentive of 1/2% per month paid to persons who choose to take their pension after the NRA.
            For e.g. If a claimant starts pension at age 60 in 2024 when the NRA is 61 years, then his/her pension will be reduced by 6% (0.5% per month). On the other hand, if pension is taken at 62 years, then pension is increased by 6% (0.5% per month).
   
   The following tables represent the proposed schedule of the increase in the Normal Retirement Age (NRA):
   
   

   Year of Increase	Normal Retirement Age (NRA)
   2020, 2021, 2022	60
   2023, 2024	61
   2025 - 2026	62
   2027 - 2028	63
   2029 - 2030	64
   2031+	65

   
   
   

   Year of Birth	Pensionable Age
   1962 and before	60
   1963	61
   1964	62
   1965	63
   1966	64
   1967 and after	65

2.  Increase the contribution rate from 9% to 11%:
   
   ► Employees will pay 5%
   ► Employers will pay 6%
   
   

   Salary	Employee		Employer
   	Old Rate (4%)	New Rate (5%)	Old Rate (5%)	New Rate (6%)
   $1,500	$60	$75	$75	$90
   $2,000	$80	$100	$100	$120
   $2,500	$100	$125	$125	$150
   $3,000	$120	$150	$150	$180
   $3,500	$140	$175	$175	$210
   $4,000	$160	$200	$200	$240
   $4,500	$180	$225	$225	$270
   $5,000	$200	$250	$250	$300