National Insurance investment strategy for government review
Stabroek News
March 31, 2004
A review of the National Insurance Scheme's (NIS) investment strategy is part of government's plan to safeguard the integrity of the scheme which has seen a decline in its fortunes in recent years.
Minister of Finance Saisnarine Kowlessar said during Monday's National Budget presentation to the National Assembly at the Ocean View Convention Centre at Liliendaal, that the NIS was experiencing declining income from both investment and contributions.
"The government will take action to arrest this development," the minister said, adding that this would include finding low-risk, high-yielding investments following a review of the strategy currently in use.
Director of the Consultative Association of Guyanese Industry (CAGI) David Yankana had told Stabroek News in a recent interview that the NIS cannot invest in any project that does not guarantee a certain level of return and that investment has to be approved by the NIS actuary.
He said neither the NIS board nor the government should undertake any policy that could jeopardise the viability of the social security scheme.
Meanwhile, Kowlessar announced an increase in the NIS contribution rate from 12% to 13% from Thursday April 1, 2004. According to the minister, the employee will be required to pay 5.2% and the employer 7.8%. The self-employed contribution rate will be increased from 10.5% to 11.5%, effective the same date.
The increase in rates comes as part of the recommendations of the fifth actuarial report which said that for the period 2000 to 2003 the rates were to be increased from 12% to 14.7% and for 2004 - 2006, 16.2%.
This newspaper had reported last year that the NIS had planned to increase contribution rates in a phased-in manner over the coming years as recommended for the organisation's sustainability, as projections indicate that the population of contributors is on the decline while those to whom pensions will have to be paid is on the rise. Stabroek News was told that the NIS' income growth is much smaller than the increase in expenditure from the payment of benefits, especially long-term payments like old-age pension.
Yankana had warned that an increase in contributions would be a cost to the employer and the contributor.
The NIS board also took a decision to raise its contribution level by a notional attachment to the five percent minimum wage increase that the government offered to public servants across the board last year.
General Manager of the NIS Patrick Martinborough had told Stabroek News that the scheme needed proper and safe investments. He said investment income only accounted for 15% of the scheme's income. "If we get more returns on investment the pressure on contributions would not be that great," he said. "We have to look for safe, high-yielding forms of investing."
Speaking to Stabroek News last year, Martin- borough said safe investments are often not the ones yielding high returns and government bonds may only yield returns of up to four percent.
He said investment in private companies could yield about 17%. He also said the NIS was looking for overseas investments as against fixed deposits and treasury bills, which were both seeing a decline in rates.
Kowlessar said on Monday that the 91-day treasury bill rate, which is the benchmark for the interest rate structure, declined from 3.91% at end of December 2002 to 3.40% at end of December 2003.