Friday, 08 March 2013 02:30
By Colin Sampson
Antigua St. John's - Chairman of the Social Security Board Everett Christian has reached the conclusion that stakeholders have turned the challenges confronting the Social Security Scheme into a “political football”.
Christian observed that the stakeholders in the Social Security Scheme – private sector and workers’ organisations – were dragging their feet on moving forward with necessary and unavoidable reform actions. He linked their reluctance to a combination of economic cost and political considerations.
The SSB chair called on both private sector and workers groups to “grow up” and abandon their “selfish approach” to solving the immediate challenges facing the Social Security Scheme. He enjoined the stakeholders to remember that there is a “human face” to the issue, and reminded them of the serious social consequences that might ensue if people at all levels of the society were unable to access their retirement benefits after having contributed to the Scheme for their entire working lives.
Christian made the remarks on Thursday during the first recording of “Media Roundtable” – the Ministry of Information’s new weekly one-hour current affairs discussion programme. “Media Roundtable” makes its debut on ABS Radio & TV this Sunday evening during prime time.
Responding to questions from a panel of four media professionals, Christian said the Antigua & Barbuda Social Security Scheme was under severe threat. He declared that the time for action had long passed, by a matter of years, and stressed that if required steps were not taken immediately, the continued existence of the Social Security Scheme could be counted in a matter of from nine-and-a-half to 12 years from today.
The Social Security Board chairman painted a bleak picture of the situation. He identified liquidity and solvency respectively as the two major challenges facing the Scheme.
In reference to liquidity, Christian described the Scheme as “asset rich and cash poor,” meaning that while it had assets on the books totalling some $600 million, these assets did not generate the revenue required to meet the SSB’s day-to-day obligations.
In terms of solvency, Christian pointed out that the Scheme’s ability to build up reserves in its early years had been severely hampered by the government’s failure to pay contributions in respect of public servants over some 30 years. In addition, a number of un-repaid advances to government during that period meant that reserves that should have totalled $550 million were unavailable to the SSB.
He outlined that an agreement had been reached with the government that included an “asset transfer” of $220 M in lands. Another component was a 30-year government bond amounting to $330 M. It was hoped that EC$30 M of these bonds will be stripped away and sold through the Regional Government Securities Market, generating some much-needed liquidity. The SSB intends to develop residential lands acquired under the asset transfer for early sale, generating additional revenues.
The Scheme was established 40 years ago, in 1973, and has continued unchanged since then, reaching its actuarial equilibrium point in 2005. Since then, the increasingly adverse dependency ratio, plus the increasing cost of pensions, has meant that for the year 2012, the SSB ran a monthly deficit of EC$1.5 M, or roughly EC$18 M annually. This trend is expected to continue at an increasing rate, and could in time total over EC$100 M annually unless immediate corrective action is taken.
It is against this backdrop that the Social Security Board chair is at a loss as to the reasons behind the foot-dragging and lack of political will that are threatening to bankrupt the Social Security Scheme.
Christian pointed out that the measures necessary to secure the Scheme’s immediate and longer-term financial stability have been outlined in the Actuarial Report. The measures include an immediate 2% increase in contributions from 8 to 10 percent. This increase would be evenly divided between workers and employers, bringing their contributions to 4 and 6 percent respectively.
In addition, it is proposed that the retirement age be gradually increased from the current 60 years to 65. The ceiling of insurable income is also due to be increased to an as yet unspecified level. Maximum insurable income to be increased from $4,500 to $6,500.
Christian observed that an attempt to widen the Scheme’s coverage to include self-employed persons on a mandatory rather than a voluntary basis was halted when it was discovered that the 2001 Amendment to the Social Security Act that had mandated the move had never been published in the Official Gazette. The Amendment remains unpublished to this day.
In the meantime, the SSB chair noted that the Dependency Ratio (that is: the ratio of contributors to beneficiaries) is projected to continue to fall from its present 5.4-to-1, reaching 4.1-to-1 in 2016 and 1.8-to-1 in 2061.
Christian offered a few comparisons of Social Security programmes, observing that contribution levels average as high as 15 to 16 percent, with retirement age at 65 years. He made reference to the case of Barbados, where contributions are at 17%, with a retirement age already at 67 years and set to move to 70.
The Media Roundtable is a production of the Public Administration Communications Unit, in collaboration with ABS Radio & TV. The discussion was moderated by Mickel Brann. The panelists on this first edition were Colin Sampson - Caribarena.com; Tracelyn Cornelius-Hernandez - ABS News; and Kyle Christian of Observer Media Group.