Minister of Labour and Social Security Colin Jordan has announced that the pensionable age of 67 will be increased to 67.5 years old in 2028 and then to 68 in 2034.
Additionally, the number of contributions to qualify for a pension will also rise, as well as the first age for reduced pension.
The Minister made this announcement during Friday’s morning session of the House of Assembly, where he gave a Ministerial statement on Revitalisation of the National Insurance Scheme (NIS).
Despite the National Insurance Fund (NIF) not currently being an issue, Jordan stressed that it was important that Government acted responsibly.
“The National Insurance Fund is strong with assets of approximately $4 billion with average yields on investments of 4.3 per cent. Even though the Fund is not in crisis now, we know that we have a date with destiny between 2034 and 2041. We refused to kick the can down the road and instead decided to ensure the people of Barbados will have a social security system that is sustainable and will be able to provide benefits for all, particularly the most vulnerable.”
Jordan said a declining work population, fewer births and people living longer are all contributing to the challenge.
He added: “Projections of the NIF indicate that between 2022 to 2025, total expenditure will exceed total income each year. As a result the Fund will need to rely more heavily on investment income to help meet expenditure each year. Eventually, investments will have to be liquidated to meet the deficit and as a result the Fund was projected for between 2034 and 2041.”
It was also announced that despite the aim to reform the scheme, there will be no increase in the contribution rates for employers nor employees. The percentages deducted and paid to NIS will remain as they are currently.
However the number of contributions to become eligible for pension will increase from 500 weeks to 750 weeks. This rule will not apply to those who will be 60 years old and above, come January 1, 2024.
Acknowledging that there will need to be a plan that ensures there is enough money to support increased life expectancy, Jordan was quick to explain why the qualification for a pension was increased to what essentially equates to 15 years from ten.
“For comparison Guyana, Trinidad & Tobago and St Lucia also saw it necessary to fix their contributions required at 750 (weeks) and others in the region who are currently at 500 are moving in a similar direction,” the Minister said.
“It is understood that with most people starting to work by their early to mid-twenties, the requirement for contributing to the NIS for at least 15 years is entirely reasonable and brings us into line with international benchmarks.”
The first age to qualify for a reduced pension is 60 years, but will transition to 61 in 2025, 62 in 2028 and 63 in 2031.
Jordan revealed that these new provisions came after consultation with the various stakeholders and three town hall planning meetings held at Combermere School, Alexandra School and The Princess Margaret Secondary School.
“In order to make the eventual reforms to revitalise the National Insurance Scheme a reality, we met and consulted with a wide range of stakeholders including the Social Partnership, leaders of faith based organisations, the Democratic Labour Party (DLP), National Union of Public Workers, Barbados Association of Retired Persons (BARP), members of the private sector and managers of media houses.”
The Minister of Labour continued: “These measures are designed to ensure the sustainability of the scheme and to make good on the assertion that National Insurance is more than a contribution, it’s our lifeline. The recommendations will first stabilise the National Insurance Fund and then maintain the size of its projected reserves at a level equal or greater than two to three times the value of annual benefit expenditure.” (JC)