THE MEANS TEST FOR OLD AGE PENSIONS SHOULD BE REINTRODUCED

Apr 22, 2012 Features / Columnists, Peeping Tom

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If the present tariffs enjoyed by the people of Linden are unsustainable in the medium term, then paying pensioners in Guyana $10,000 without a means test is even more unsustainable.
The government and A Partnership for National Unity (APNU) have reached an agreement which will see an increase in old age pensions from $7,500 per month to $10,000, and rise of 30%.
There are many pensioners living outside of these borders who do not qualify under the present residency requirement for this pension, but this is not going to deter some of them from wanting to have this equivalent of US$50 per month. Who knows, some of them may already be receiving the present old age pension even though they do not qualify.
There has been great controversy over the number of pensioners in Guyana. The late Sheila Holder from the Alliance for Change had gone to great pains to point out that there are anomalies with the number of persons who are said to be registered for old age pensions.
Right now we are told that the figure may be around 40,000. With a population estimated at around 720,000, and with a life expectancy still perhaps below 60 years, and with pensions payable at age 65 (which is believed to be higher than the average life expectancy) it is hard to fathom how there can be 40,000 pensioners resident in Guyana.
With 40,000 old age pensioners, it means that each month the government has to find 400 million dollars or 4.8 billion dollars per year just to pay old age pensions. This is clearly unsustainable.
This is not to suggest that the old age pensioners do not deserve $10,000. They do. In fact, they deserve $20,000 per month. Unfortunately, however, if old age pensions are going to be sustainable, there cannot be universal coverage for resident Guyanese.
Because of the perceived discriminatory way in which the PNC had administered pensions during its time in power – when pensioners had to prove that they did not have the means to survive before receiving the pensions – the PPP/C government when it took power in 1992 decided to do away with the means test. The result was that once you were sixty-five years of age you qualified for old age pensions.
So whether you were rich or poor, whether like some of the old fogies in public office who are earning hundreds of thousands of dollars, plus half of this as NIS pensions, everyone sixty-five years or over and now permanently resident in Guyana, qualified for old age pension.
It should not be so, because this is unsustainable. Old age pension is not an earned right. It is a form of social security which was usually granted to those without means. The ultimate social security programme is the National Insurance Scheme. That is a contributory scheme in which pension benefits are paid at age 60, once you have the requisite contributions. A person can end up earning a NIS pension which is as much as 50% of their average salary over the last five years of their employment. That is an earned benefit, because the contributors to the NIS had paid premiums that qualify for this benefit.
Old age pension on the other hand is not a contributory scheme. As such, it should only be for residents who have never worked – those who do not qualify for the minimum NIS pension.
However, right now there are persons who work for hundreds of thousands of dollars and who get a fat cheque from the NIS each month, and still they will claim that miserly $7,500 (now $10,000) in old age pension. This category of employees should not be getting old age pension, because it is not an earned scheme and they are already earning enough.
At the same time, there are persons who do not qualify for NIS and whose working days are over. These are the persons who deserve a higher old age pension.
What is even more disgusting is that there are Guyanese overseas who believe that they should be also receiving old age pension, and based on the numbers that are being thrown out, there is a suspicion that some non-residents may be on our old age register along with persons who may have padded their real age.
This is why pension reform should first involve sanitizing the old age pensions register. The names on that register need to be gone through to ensure that only those eligible qualify.
If increases in old age pensions are to be sustained, a decision will have to be made in relation to all social security pensions, holistically, because there is no way that the government can sustain increases, even to compensate for inflation.
As such, the government should move towards an integrated social security system in such a way that a means test is reintroduced for old age pensions. Otherwise, future generations will be burdened with heavy taxes to fund these old age pensions.

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