National Gas Company president Frank Look Kin chats with Finance Minister Karen Nunez-Tesheira following her address at yesterday’s breakfast meeting of the Couva/Point Lisas Chamber of Commerce at the NGC Centre, Couva. Photo: Tony Howell

By Yvonne Webb

Finance Minister Karen Nunez-Tesheira said yesterday T&T’s ageing population could place a severe burden on the working population to make higher contributions to the National Insurance Scheme (NIS).

She said the NIS pay-as-you-go system, where the contribution of today’s workers are transferred to today’s retirees, is particularly vulnerable to prevailing demographics.

“The demographics of our working population clearly indicates we are in the throes of the ‘ageing population syndrome’ in which the obligation to deliver promised benefits places an increasingly heavy burden on the working population to make higher contributions,” she said.

Addressing members of the Couva/Point Lisas Chamber of Commerce at a breakfast seminar at the head office of the National Gas Company, Nunez-Tesheira said the options are usually limited in such circumstances.

“You either decrease benefits or increase contributions,” she said.

However, she said decreasing benefits is not an option, noting “our government has a social conscience.”

Nunez-Tesheira added that, based on the financial strength of the NIS portfolio, the Government has managed to increase the NIS benefits with minimal increase in contributions as of January.

She said while there has not been any sustained public outcry concerning the increases, the National Insurance Board (NIB) in February 2006 engaged the International Labour Organisation to conduct the seventh actuarial review of the NIS system.

The review was to determine whether or not the NIS was operating on a sound financial basis and to recommend modifications that may render the NIS a more effective and efficient mechanism for providing social insurance protection.

Nunez-Tesheira said the results put the NIS on a collision course with demographics.

“At present, there are four contributors to one pensioner,” she said.

“By 2030, there will be two contributors to one pensioner. It is estimated that by 2055 there will be one contributor for every pensioner and by 2055, the number of retirement pensioners would triple the current level.”

Nunez-Tesheira noted the significant increase in the number of retirement pensioners following the implementation of the minimum monthly retirement pension of $1,000 in 2004.

“At the end of the inter-valuation period, the number of retirement pensioners was 46 per cent higher than projected,” she said.

These results, she said, “tells us the ageing population syndrome, together with the maturing of the NIS, is expected to have a material impact on the future long-term financial sustainability of the NIS if corrective pension reform measures are not put in place in the short run.”

NIB representative Cherry Mc Millan also addressed the participants, made up of mainly employers, and cautioned that outstanding contributions of five years and more was liable to attract a penalty of 100 per cent before interest was applied. She also stressed that underpayment of contribution equalled non-payment of a contribution.

Chamber president Ashmeer Mohamed advised his membership to request up-to-date statements on their contributions as this has been a challenge for the NIB.