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Recommendations

  • Pensions in payment and fixed-rate benefits (except the minimum retirement pension) should be increased by 52.3 percent in January 2013 to reflect the increase of the CPI since the last actuarial review (Appendix 6 presents the recommended benefit rates). At the same time, the maximum insurable earnings should be increased to TT$11,800.
     
  • From January 2014, all system’s parameters should be subject to an automatic annual adjustment. Pensions in payment and fixed-rate benefits should be adjusted based on the evolution of the CPI and the maximum insurable earnings should be adjusted according to a wage index.
     
  • The total contribution rate for salaried workers should be increased to 12.0 percent for the period January 2013 to December 2017. Contribution income should be allocated to the three benefit funds according to the following proportions:

    • - Long-term fund: 89 per cent
    - Short-term fund: 6 per cent
    - Employment injury fund: 5 per cent  

  • The pay-as-you-go cost rate at the end of the projection period in 2060 is considered unsustainable at 30 per cent of insurable earnings. It is recommended to adopt reforms, either by way of increasing contribution income and/or reducing benefit promises, in order to ensure the long-term financial sustainability of the NIS. Particular consideration should be given to the development of a strategy for gradually increasing the contribution rate over the next three decades whilst favouring the gradual increase of the retirement age.
     
  • Reserve objectives to be maintained for each fund should continue to be established as follows:

    • - Short-term: 2 times the annual benefit expenditure
    - Employment injury: 10 times the annual benefit expenditure

  • Long-term: the remaining excess of income over expenditure

  • The present earnings class system should be converted into a career average re-valued earnings system. The report presents three possible formulas for such a conversion and indicates a series of criteria that should be considered for their evaluation. It is recommended that the various stakeholders be consulted on those options and the suggested criteria before deciding on the most appropriate option.

  • Conditional to the conversion of the present earnings class system into a system based on a percentage of earnings the number of weeks of contributions required for eligibility to the retirement pension could be reduced from 750 to 260. However, for persons having paid contributions for less than 750 weeks, the minimum pension should be prorated.
     
  • The contribution rate for the SEP fund should be established at 11.2 percent (10.7 percent for Long-term benefits and 0.5 percent for Short-term benefits) Age credits for eligibility purposes should be granted at a rate of 50 contribution weeks for each complete year elapsed between the age of 50 and the attained age of the person at the introduction of these measures (up to a maximum of 6 years of credit). The government should consider the possibility to support (through a direct subsidy) part of the contributions of low-income SEP.

    • - Minimum survivors’ benefits should be increased as follows:
    - Child: $600
    - Dependent parent (if both are alive): TT$300 each
    - Dependent parents (if only one is alive): TT$600
    - Orphan: $1,200

  • The maximum duration of maternity benefits should be increased from 13 to 14 weeks.
     
  • The Ministry of Finance and the Ministry of Labour should jointly investigate the extent of the dual compensation for work injuries (Employment injury benefits paid by the NIS and the compensation offered under the WC Act). In addition, the NIB should undertake, in collaboration with the Ministry of Labour, the measurement of the adequacy of compensation offered to injured workers by the existing systems of compensation, particularly for persons with a permanent loss of earning capacity.
     
  • Before permitting new optional contributions in a new National Insurance Plan, it would be necessary to study the investment instruments already offered by the private sector and the level of their management fees.
     
  • Closer links should be established between the Investment Policy Statement and the actuarial review in order to adequately reflect the time-horizon of the system in the determination of the NIBTT asset allocation (taken into account in a new Investment Policy Statement dated June 2012). In addition, the NIBTT should continue its representations for an increase of the limit presently imposed on overseas investments.
     
  •  Administrative expenditures of the NIBTT should be allocated by branch according to contribution income and benefit expenditure in equal proportions, until a more accurate system can be developed.