Arnhim Eustace is wrong about the NIS

Fri, Feb 10. 2012

Editor: The public has unfortunately been misled on the financial condition of the NIS and on matters related to pension reform. The Prime Minister, in his Budget speech, made the case for pension reform and spoke frankly about issues concerning social security in St Vincent and the Grenadines.{{more}} The Leader of the Opposition and his apologists and sympathizers have since demonstrated tremendous irresponsibility and scant regard for the truth in related commentary.

The Honourable Arnhim Eustace gave people the wrong impression that the NIS is going to run out of money by 2016, and Mr Kenton Chance, the self-proclaimed investigative journalist who writes about SVG from Taiwan under the banner “I-Witness News”, apparently just took his word for it. Mr Chance recklessly and incorrectly reported that the latest actuarial review said that “unless the 8 per cent contribution rate is revised, the NIS will not have enough money to cover its expenses after 2016.” The truth is, according to the actuarial projections, the NIS could meet its obligations to pensioners and other operational expenses without reform up to around 2040.

Mr Eustace also said that the NIS stands to lose a whole $62 million as a result of the collapse of the British American Insurance Company (BAICO) and the Colonial Life Insurance Company (CLICO), and he made a big deal about the fact that the “profit” of the NIS fell from $27.4 million in 2009 to $5.5 million in 2010. It is, first of all, improper to describe NIS’s net income (or, to be even more precise, its funding position) as profit. NIS has an asset base of almost half a billion dollars, and the value of its investment in CLICO-BAICO is really just $53.9 million, a lot of which, we now know, will be recovered. The high recoverability is especially significant because the relatively low net income that the NIS reported for 2010 resulted from the fact that the accountants made provisions for losses on the CLICO-BAICO investment that will not actually be experienced.

Pension reform is necessary, but the NIS is in better shape than they would like to make us think.

R. T. Luke V. Browne