PENSION REFORM is on the list of critical issues that the Ralph Gonsalves administration must address if National Insurance Services (NIS) is to be sustainable in the long term.
These comments were made by the Prime Minister during an interview with SEARCHLIGHT yesterday, Thursday October 6, on parametric reform which he admits presents challenges for some Vincentians heading into retirement.
He said it was unfortunate that some of the pension benefits of Winston Boyea, a former employee of St Vincent Electricity Services Limited (VINLEC), were lost following the 2014 reform; however, he noted that Boyea’s situation is not unique as employees in the private sector, central government and those in public and statutory enterprises have been similarly affected.
Boyea told SEARCHLIGHT he was ‘forced into retirement’ when he reached his 60th birthday in May last year, which caused him to lose a cumulative total of 18% of his pension rights national insurance services.
Under the parametric reform, the retirement age was to increase gradually based on the year of birth, and Boyea therefore receives a lower pension than he would have had if he had retired at 63.
Gonsalves said, however, that VINLEC, as a state-owned company, has the power to set policy regarding the retirement age without government interference or objection.
He noted that in cases like Boyea, where the work responsibilities of employees are high risk, it is not always possible to work past 60.
“We don’t have a law at the national level to say that the private sector or any state company must be retired at 60. Each company determines that.”
He said that for civil servants, when the retirement age does not match the retirement age, extensions are sometimes granted so that employees can continue
work and thus avoid the penalty of 6% per year. “People who are not on the state pension, we are currently giving extensions on a case-by-case basis. In fact, it would be very rare for someone not to get the extension. they are not doing well or if they have a particularly bad record.
He said the ongoing work on pension reform needs urgent attention if the NIS is to remain beneficial for future generations.
Highlighting the structure of the current model of pension benefits for civil servants, Gonsalves said it is unsustainable because public sector employees receive both a contributory and non-contributory pension.
“…So you have a situation where, by 2030, retiring workers who have all their full years would end up, for NIS and state pension, with up to 127% of their salary. Which means 27% more than when they left they would get more money in retirement than they get now.
The prime minister said the government was considering different options to bolster the fund, some of which have been presented to unions.