FINANCE Minister Colm Imbert said yesterday that the proposal to increase the retirement age to 65 from the current age of 60 is under “active consideration,” but he said the Government has not made a “firm decision” on the matter as yet.
Imbert made the comment in delivering the keynote address at a webinar hosted by the Development Bank of Latin America (called CAF) on the topic “Pensions and Healthcare Systems: Challenges posed by aging, technological change and informality”.
The idea of phasing in over a ten-year period the increase in the current age of eligibility for a National Insurance pension to 65, starting in 2025, was one of four options raised in the Tenth Actuarial Report of the National Insurance Board (NIBTT).
Imbert said increasing the NIBTT pension age to 65 would allow recipients to continue to retire at 60 with a reduced pension or work until 65 and receive a full pension.
“The actuaries have proposed that the pension be reduced by approximately six per cent for each year that an individual retires before the increased age of retirement,” said Imbert.
The minister noted that while the typical retirement age in T&T, both in the public and private sectors, is 60, there are some areas in the public sector, notably in local government, where the retirement age is already 65.
“However, the initial public feedback on this proposal for increasing the retirement age has been mixed, with some welcoming the opportunity to work for five more years and others complaining that an increased age of retirement would adversely affect promotional opportunities with the public service, by making them wait five more years to be promoted.
“Additionally, the idea of a reduced pension at age 60 would certainly be unpopular in many quarters. This issue is therefore still under active consideration, with no firm decision yet.”
The other three options raised by the Tenth Actuarial Report, according to Imbert, were to increase contribution rates, reduce the pension for those retiring before 65 and freezing the minimum pension until it is at most 80 per cent of the minimum wage. He noted that T&T’s minimum of $3,000 is now equal to 100 per cent of the country’s minimum wage.
The most recent actuarial report raised the four options because the NIBTT “faces serious sustainability challenges and risks of reserve exhaustion.” Imbert said the actuarial projections indicated the NIBTT had long-term financial issues “whether it is from the expenditure of the NIS exceeding its income or from the assets of the National Insurance Fund becoming depleted within the next 25 years, as projected in the Tenth Actuarial Report.”
The root cause of the NIBTT’s problem is that in T&T life expectancy has increased steadily over the last 50 years, while birth rates have declined, he told the CAF conference.
He said that as a population’s maturity profile increases, countries need to ensure that the necessary support systems are in place to support this vulnerable section of society. He said the support needs to extend beyond just ensuring proper health management, but also has implications for transportation, social services, and security.
Imbert also said the Government has been “actively monitoring” the issue of bringing workers in the informal sector under the umbrella of the National Insurance Scheme.
“As a Government, we have been actively monitoring this issue and exploring the possibility of the full incorporation of informal workers into the NIS. Of course, the costs and benefits of incorporating self-employed persons into any national pension scheme must be very carefully examined, since there would in all likelihood be a significant cost at the beginning of any such move,” said the Minister of Finance.
Imbert cited a report from the Organisation for Economic Co-operation and Development (OECD) that pointed out the challenges associated with informal workers flow from a large proportion of the population, mainly in emerging economies, having no pension coverage, which exposes them to economic risks.
“As mentioned previously, any shortfall in accumulating resources to support retirement may ultimately have to be borne by the State. Therefore, it is imperative for any government to manage this situation properly for the benefit of all citizens,” Imbert said.