NIS continues to struggle with low returns from investments

Oct 05, 2018 News

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Next year, it will be 50 years since the National Insurance Scheme (NIS) came into existence. The entity, critical to retired workers for a pension, has been assisting with paying for funeral, spectacles and even benefits for surviving family members.
However, in recent years, there has been growing concerns over the options of NIS when it comes to investing the billions of dollars it is collecting annually from workers. The interest would have been critical to reduce or erase any deficits.
The payouts have been surpassing what NIS has been collecting. NIS has been attempting to increase its collections from non-compliant employers as well as self-employed persons.
Another source of income for the scheme has been investing those monies and getting returns.
Among some of the investments included the US$36M-plus in the bankrupt CLICO; the Berbice River Bridge and more recently, an investment in a syndicated bond for the Guyana Sugar Corporation (GuySuCo)
However, the investments have not been working out well for NIS.
Speaking at the recently held 49th anniversary of the scheme, General Manager, Holly Greaves, told a gathering that included Finance Minister, Winston Jordan, that the realization of returns on investment is a critical component of the NIS funding.
“The scheme continues to be faced with low interest rates and no interest from some of its non-performing investments. Nevertheless, investment income will be boosted from a Government guaranteed investment in NICIL earning interest of 4.5% over the next five years (GuySuCo) bond.
“In addition to this, we have so far received $774M in interest and capital from the Government Debenture which was set up to repay the CLICO investment.”
It appears nothing is coming in a hurry from the Berbice Bridge which is struggling to keep its head above water and has been clamoring for Government to approve a hike in the tolls- a hike that Government is not interested in.
Hundreds of millions of dollars are owed to investors like NIS, it has been disclosed. According to Greaves, the scheme started as a modest social security institution on the September 29, 1969. It is currently recognized as the main “Social Security” provider to the people of Guyana.
“It is the protection provided for the population, when such is interrupted by occurrences such as sickness, injury, retirement through age, sudden death of a breadwinner, childbirth or death.”
However, while NIS continues to discharge its corporate social responsibility by playing a major role in income support to the elderly, it is a fact that for many pensioners, it provides their main and only source of income.
Coupled with this, there is an increase in medical care expenses paid to eligible claimants.
She disclosed that a brief examination of the performance over the period January to August 2018 revealed that the National Insurance Scheme collected $14.4 billion or 62% of the $23.1 billion budgeted target for 2018. A further $8.3B is projected to be collected between September and December 2018. As a result, the projected revenue is targeted at $22.7B.
“Consistent with this, the Scheme expended over the period January to August 2018 $15.5B or 66% of its $23.5 budgetary allocation. A further $8B in expenditure is projected for the period September – December 2018. Total expenditure for the year is projected at $23.6B.
“Based on the projected numbers recorded, for revenue and expenditure ($22.7B and 23.6B respectively) the scheme is expected to record a deficit $854.9M dollars,” the NIS chief said. The primary contributing factor, to the escalating total expenses was Benefit Payments of $14B, which represented approximately 92% of the $15.5B in expenditure as at August 31, 2018.
The pension branch accounted for $13.1B or 92%, while the short-term and industrial branches accounted for $1B or 7% and $160.9M or 1% respectively.
At the end of August 2018 there were 51,178 pensioners on roll. Of this amount 37,285 are in receipt of Old Age pension.
This number consisted of 11,316 overseas old age pensioners and 25,969 local old age pensioners. A further breakdown revealed that 24,347 persons are in receipt of a minimum pension as at August 2018. The minimum pension is currently $30,000 and this represents 50% of the minimum wage.
In terms of claims received and processed, as at August 2018, the NIS received 82,934 claims. The amount received comprised of 75,958 short term claims, 4,883 long term claims and 2,093 industrial claims. Of the amount received 68,399 or 90% were processed and paid.
Of the $1.5 billion budgeted for Short term benefits in 2018, the scheme has already expended $1 billion. The main contributing factor to this expenditure line is the $442.5M already spent on Medical Care expenses as at August 2018.

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