9th Actuarial Review

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The present actuarial review covers the 3-year period up to 30 June 2013 and presents a projection of the financial situation of the National Insurance System for the next 50 years.

Experience of the NIS since the last actuarial review
Financial Results

 

Accumulated assets have been very close to projections every year since the last actuarial review. This is the result of different cancelling effects. Investment income was lower than expected in 2011-12, but higher than expected in 2012-13. During these two years, lower than expected contribution income was partially offset by lower than expected benefit expenditures.

Adjustments to contributions and benefits

 

In March 2013, pensions in payment were increased by 25%, while fixed rate benefits and minimum survivors’ benefits were increased by 50.0 percent. (A further increase of 20.0 percent of pensions in payment took place in March 2014). In March 2013, the maximum insurable earnings (MIE) was increased to TT $10,000, and the contribution rate to 11.7 percent. In March 2014 the MIE was increased to TT$12,000, and the contribution rate to 12.0 percent.

NIS demographic and financial projections

The total number of pensioners is projected to increase significantly in the future, from 135,049 in 2013-14 to 353,255 in 2060-63 while at the same time the number of contributors will be just below 500,000 for the next 10 years but will then gradually decrease to 378,352 in 2062-63. The ratio of contributors to pensioners will thus decrease from 3.7 to 1.1 over the next 50 years. Financial projections reveal that the system’s expenditures exceed contribution income in the financial year 2013-14. The total assets of the NIS will however continue to increase until 2018-19 because part of the investment income will be used, in addition to contributions, to support the expenditures of the system. From 2019-20, assets will rapidly decrease and the NIS funds will be completely depleted in 2029-30 if nothing is modified in terms of contributions or benefits of the system. The pay-as-you-go (PAYG) cost rate is projected to increase from its current level of 13.8 percent in 2013-14 to 35.7 percent in 2062-63. The general average premium of the system (the constant contribution rate necessary to finance all NIS benefits over the next 50 years) is 23.8 percent. This may be compared to the present contribution rate of 12.0 percent. The financial situation of system has significantly deteriorated since the last actuarial review. Action must be taken to restore its financial health. The present contribution rate of 12.0 percent is not sufficient to support the level of benefits in the long run.

The main Short and Long-term Recommendations

Short-Term Measures

  • Increase the Maximum Insurable Earnings (MIE) limit from $12,000 to $13,600
  • Contribution rate should be increased to 13.2% in 2016, from 12%.
  • Maintain the present level of the minimum pension at $3,000, and be indexed at a rate slower that the other parameter no earlier than 2017
  • System parameters (MIE, minimum pension and contribution rate) should be automatically adjusted.

Long-term Measure

  • The retirement age for an unreduced pension should be gradually increased from age 60 to age 65 over the period 2025 to 2060. This recommendation will require extensive consultation with all stakeholders.

   

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National Insurance Board of Trinidad and Tobago (NIBTT)