National Insurance Scheme (NIS) reform is currently a hot topic in the Caribbean
as many nations confront the viability of their schemes and propose reforms. Social
Security is essentially about income replacement during events and periods when
individuals face loss of income. The typical events and periods covered by schemes
include sickness, maternity leave, employment injury, unemployment, and of course
retirement. In light of the inevitability of these events and periods of time for most of us,
NIS is everybody’s business, especially the most vulnerable among us.
All Caribbean countries have a comprehensive NIS providing coverage against
all or some of these events and periods of time. NIS offers old-age pensions, invalidity,
and survivor’s pensions, as well as benefits for sickness, maternity, and employment
injury. In addition, a few countries have added unemployment benefits (Barbados and
The Bahamas), and partial health benefits (Belize, Jamaica, and The Bahamas). In this,
the first article of a three-part series I present data on the design features of the NIS old
age pension schemes, the major component of NIS, across the Caribbean.
Table 1: Key Design Features of NIS Schemes Across Caricom
Country Cont Rate
(Private)
Wage Ceiling (pm) Normal
Pension
Age
Early
Pension
Age
# Weeks
for Age
Pension
Minimum Pension (pm)
Local
Currency US $ Local
Currency US $
Anguilla 10.0% $7,500 $2,809 65 – 500 $715 $268
Antigua-Barbuda 14.5% to
16.0% $6,500 $2,434 63 to 65 60 500 $350 $131
Bahamas 9.8% $3,207 $3,207 65 60 500 $346 $346
Barbados 18.3% $4,880 $2,440 67 60 500 $1,052 $526
Belize 10.0% $2,253 $1,127 65 60 500 $204 $102
BVI 8.5% $3,750 $3,750 65 – 500 $260 $260
Dominica 13.5% to
15.5% $7,000 $2,622 65 60 500 $325 $122
Grenada 11.0% $5,000 $1,873 60 – 500 $201 $75
Guyana 14.0% $280,000 $1,344 60 – 750 $35,000 $168
Montserrat 11% to
15% $4,000 $1,498 65 – 500 $333 $125
St. Kitts-Nevis 11.0% $6,500 $2,434 62 – 500 $430 $161
St. Lucia 10.0% $5,000 $1,873 65 60 750 $300 $112
St. Vincent Gre. 10.0% $4,333 $1,623 63 to 65 60 500 to 750 $303 $114
Turks Caicos 10% to
12% $4,000 $4,000 65 60 500 $405 $152
Trinidad & Tobago 13.2% $13,600 $2,040 60 – 750 $3,000 $450
Source: Mr. Derek Osbourne (Consultant Actuary to several Caribbean Social Security Schemes
The key design features presented in the table are, the rates contributors are
required to pay (contribution rate), the maximum level of income on which contributions
are paid (wage ceiling), the ages at which eligible contributors qualify for a full or normal
pension and an early pension, the number of weeks persons are required to contribute
before they are eligible for a pension from the scheme, the minimum pension for any
eligible contributor and the rate used to calculate normal pensions (accrual rate). As can
be seen in Table 1, there is some degree of consistency in the design features of NIS
across the region with noticeable differences in the contribution rates, minimum
pensions, and to some extent in the wage ceilings.
Table 2 presents basic descriptive statistics on the key design features. The
average contribution rate is 11.44% and ranges from a low of 8.5% in the BVI to a high
of 18.3% in Barbados. The average minimum pension is US $207 per month but ranges
from a minimum of US $75 in Grenada to a high of $526 per month in Barbados. The
average wage ceiling is US $ 2,338 per month and ranges from a low of $1,127 in
Belize to a high of US $4,000 per month in Turks and Caicos. There is much greater
consistency across the normal pension ages, early pension ages, and the minimum
number of contributions required to be eligible for a pension from the scheme. The
differences across the schemes point to the need for a carefully designed and
constantly adjusted framework for persons who move between countries for work.
Table 2: Descriptive Statistics for Key Design Features
of NIS Schemes Across Caricom
Country Cont Rate
(Private)
Wage Ceiling (pm) Normal
Pension
Age
Early
Pension
Age
# Weeks
for Age
Pension
Minimum Pension
(pm)
Local
Currency US $ Local
Currency US $
Average 11.4% $ 23,385 $ 2,338 63.8 60.0 553.6 $ 2,882 $ 207
Median 10.0% $ 5,000 $ 2,434 65.0 60.0 500.0 $ 346 $ 152
Minimum 8.5% $ 2,253 $ 1,127 60.0 60.0 500.0 $ 201 $ 75
Maximum 18.3% $280000 $ 4,000 67.0 60.0 750.0 $ 35,000 $ 526
Any NIS reform program will likely involve tweaking one or more of these design
features and an appreciation of these features is critical for a meaningful discussion of
NIS viability and reform. In the next article, I will assess the viability of NIS Schemes
across the Caribbean, based on some widely used actuarial metrics, and the final article
will lay out some reform options.
Prof. C. Justin Robinson
Professor of Finance & Principal, UWI Five Islands Campus.
