The National Insurance Scheme (NIS) plans to increase contribution rates in a phased manner over the coming years as recommended for the organisation's sustainability.

Projections indicate the population of contributors is on the decline while those to whom pensions will have to be paid is on the rise.

In response to this bleak prognosis, the board of the NIS took a decision to raise its contribution level by a notional attachment to the five percent minimum wage increase that the government offered last year. For the period 2000 to 2003 the rates were to be increased from 12% to 14.7% and for 2004 - 2006, 16.2%. But the rates have not been increased just yet.

Stabroek News understands that the scheme's income growth is much smaller than the increase in expenditure from the payment of benefits, especially the long-term ones like old age pension. Income garnered from investment is also falling, even though the NIS is making a surplus and is investing that surplus.

The NIS is to have discussions with various social groups on the proposed increase in rates. Some of the groups are the Trades Union Congress (TUC), the Consu-mers Association, the Private Sector Commission (PSC) and the Consultative Associa-tion of Guyanese Industry (CAGI). A decision on the matter is hinged upon the meetings with these groups.

Stabroek News business columnist Christopher Ram, in an article on October 19, lamented the fact that the NIS did not implement all of the actuarial recommendations without which the organisation may not remain viable. According to Ram, the actuaries recommended that every benefit branch of the scheme have its financial autonomy, instead of allocating total income and expenditure to various branches according to arbitrary percentages.

Ram said the recommendations to have funds transferred from short-term benefits to long-term benefits and to have contribution rates for the short-term benefits branch be 2.2% while the employee benefit branch be 1.5% were implemented during 1999.

David Yankana, Executive Director of CAGI and a member of the NIS Tribunal, told Stabroek News that the contributions increases will bring in additional income to the scheme and at the same time increase the NIS' liability for the payments of higher benefits. He noted that the NIS would look at what the projection for pension is and work out what the reserves ought to be to carry these benefits.

According to Yankana, the actuary advised that the NIS must have enough to carry the weight of having to make pension payments for the next four years.

He said that for the fifth actuarial review, done in 1999, the position was favour-able and the actuary had anticipated that there would have been a deterioration, hence the recommendations made. But Yankana warned that an increase in contributions at this time has other implications. He said it would be a cost to the employer and the contributor.

In a recent interview, NIS General Manager Patrick Martinborough said since that review there was another in 2002 that made some of the same recommendations. "For now we are ok, according to the review," he told Stabroek News, adding that the income of the scheme can match the present expenditure, which is 12% of the scheme's insurable earnings.

He said the biggest expenditure is the payment of pensions; eight per cent of the population falls within the pension bracket and he expects contributions will have to increase to match expenditure, one of the recommendations of the actuaries.

He said the present contribution rate of 12% shared by the employees and employers would have to be increased. "If we wait [for a long time] the increase will be too large. It should be done gradually," he said.

"We find that the number of persons entering the population is on the decrease and in the future, those in the pension bracket will have it harder than those in it now. We will have to make adjustments in the contribution rates."

He told Stabroek News that the scheme needs to have proper and safe means of investing money and at present investment income accounts for 15% of the scheme's income. This is compared to 80% from contributions. "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."

The NIS is also working to have its administrative costs reduced to 1.5% in the hopes of making the scheme more viable, according to Martinborough.

He added that work is also being done to bring the scheme's records up to date by computerising them. He said too, as reported in this newspaper, that by May/June, the NIS will be able to give each contributor a record of his or her contributions from as far back as 1969.

He noted that safe investments are often not the ones yielding high returns and said government bonds may only yield returns of up to four per cent, while investment in private companies could yield about 17%. He added that the NIS is looking for overseas investments, which would be good for the fund.

The general manager said most of the NIS' investment is in the form of fixed deposits. But he noted that the Fixed Deposit rate and the Treasury Bill rate are on the decline. He said too that among the recommendations of the actuary is that the NIS seek more lucrative investments.

Yankana said the NIS has sizable equity in some local companies, but he said the value might have been overstated in the first instance when compared to the current traded value of those equities on the stock exchange. "The NIS will have to look at what is [happening] on the stock exchange [as] there may be equity there that [the NIS] can invest in," he said.

Yankana said the NIS has to earn a certain level of return from the investments or the scheme will continue to be in jeopardy. The most important issue in the report prepared by the International Labour Organisation (ILO) is believed to be the contribution rates increase and its importance to the viability of the scheme.

He said the actuarial report suggested the NIS seek out foreign investment opportunities and that it should be done through a well-established investment group.