Thursday, April 18, 2024

Retirement crisis looming, says former Minister

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Barbados faces an impending retirement crisis.

This is the belief of Dr David Estwick, the former Minister of Economic Affairs, who was speaking during the Democratic Labour Party’s St Peter branch meeting at Mile-And-A-Quarter on Sunday.

The topic of discussion was A Crisis Within A Crisis – The Risk of Pensions in Barbados.

Estwick raised the alarm over the country’s future retirement prospects, highlighting the worsening dependency ratio and the unpreparedness of both the Government and the over-65 age group for the challenges that lie ahead.

Speaking about the solvency of the National Insurance Scheme (NIS) which he deems a national emergency, he said “The Government of Barbados is unprepared for these future pension liabilities, and the over-65 age group in Barbados is woefully unprepared for retirement.”

He continued:  “It is now an emergency because there was significant damage done to the NIS balance sheet because of the domestic debt restructuring exercise of 2018, that resulted in the NIS losing over $1.6 billion in debt-based assets, in addition to the negative impact the COVID-19 pandemic had on contributions and benefit pay out. In fact, the operating balance at the NIS becomes negative by 2028, six years from now…and the NIS funds would be depleted in 12 years. Compounding the problem is a matter of poor compliance. In fact, about one in every eight self-employed persons pay NIS,”

Estwick, who headed the Infrastructure Committee of Cabinet under Prime Minister Freundel Stuart, recommends the elimination of double taxation on pensions and the scrapping of any direct tax on people who take up jobs post retirement, as strategies to help save the NIS from potential collapse. He also suggested that Barbados introduce a tax write-off of 150 per cent of business investment for people over the age of 60.

However, given the severity of the situation, Estwick believes things will become more expensive for those in the 16-60 age group who are responsible for paying NIS.

“It is my contention that Barbadians should brace themselves for increases to the present NIS contribution rates that apply to employees and employers of 11.1 per cent and 12.75 percent respectively; working for longer periods (70-75) and a reduced pension benefit”. (JC)

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