You can fool all the people some of the time and some of the people all the time, but you cannot pull wool over the eyes of all the people all the time. Last week’s national insurance response to my earlier column, has proved that the situation is far worse than even I thought. Apart from reading like a reply drafted by committee, Derek Lowe, the author, has removed one element of doubt from my mind: whereas I was under the belief that senior national insurance staff were unclear about the finer points of pensions policy, he has erased any doubt. However, before looking in detail at the investment strategy in a future column – or lack of one – by the national insurance board, let us first look at its administration. According to the 2008 report by the Auditor General (the 2009 report had not been published when I checked), the administration of the scheme is in chaos. The report states: “The accounts for the national insurance fund for the years 2000, 2001 and 2002 were audited. The audit for the 2003 financial year is in progress.” More damningly, the report continues: “The audit of the accounts of the national insurance fund has been a source of concern for some time. This audit is currently five years in arrears. “As previously stated by this office, audits conducted several years after the period in which they were due do not assist the accountability process, and are of little help to decision makers. “The final statements of this fund should be audited no later than six months after the close of the financial year . . . . “The department is making an effort to bring the accounts up-to-date so that they can be submitted for audit, but the time has come for the establishment of a project team with the sole aim of bringing the accounts up-to-date so that they can be audited in a timely manner.” If the national insurance fund the Auditor General is referring to is the same as the national insurance board, then what is being described is not just incompetence, but gross incompetence. Despite this monumental example of administrative inability, no heads have rolled – not the officer responsible, not the head of the unit, the head of the fund, the permanent secretary, the minister or even the various governments. Further, if it is this level of gross administrative inefficiency to whom future pensioners in Barbados are delegating the management of their retirement income, then, to quote one senior politician, they should not just be afraid, but very afraid. Other issues raised by Mr Lowe are worthy of brief comment. He mentioned that the scheme is not a pay-as-you-go scheme, but is partially funded, that is, from the investment returns. Pay-as-you-go means that the contributions of this generation of contributors go to pay this cohort of pensioners. The hybrid nature of the scheme is the invested element, the defined contribution part of the scheme. Even in its own marketing literature it states: “The reality is that there will be many more pensioners but at the same time fewer workers to support those pensions.” In the jargon, a partially funded scheme is when the employer makes contribution, which is not the same from investments. We know Barbados has one of the highest HIV infectivity rates in the world for under-24 year olds, with a replacement fertility rate of about 2.1 per cent, a crisis waiting to happen. Finally, Mr Lowe also talks about the triennial actuarial report, but where are they on the website? What about the consultant actuary’s reports? What are the assumptions, the mortality cross-subsidy and mortality drag? I shall return to look specifically at the investment strategy in a future column.
•Hal Austin is an award-winning journalist with the Financial Times. He is Barbadian and may be reached at [email protected]
