As the St. Christopher Social Security Board (SSB) continues to grapple with devising the reform of the institution to ensure its viability and survival, Director of the board, Christopher Louard, says already, critical elements to ensuring these outcomes have been identified.
In a recent public appearance, Louard hinted that while some of the reform measures may be challenging and will likely receive some resistance, they are necessary to ensure the Social Security Fund is sustainable.
Among the areas under consideration are increasing SSF contributions from 11 percent to 16 percent, increasing the pension age from 62 by as many as three years and increasing the minimum wage contribution from 500 to 750 weeks.
Implementing these reforms are critical as immediate measures to ensure that the SSF can survive beyond its predicted depletion in 2040.
The collapse of the SSF would be a devastating blow to the country’s social and financial structures. Prime Minister Dr. Terrance Drew, who has ministerial oversight of the SSB, said this cannot be allowed to occur.
Ultimately, Director Louard explained that all reform efforts will hinge on the vibrancy of the national economy and the ability of new businesses to flourish and existing ones to thrive.
“There are four key ingredients to ensuring the long-term sustainability of the Social Security Fund,” said Louard. “There must be a healthy and growing economy. So, in terms of the projects that we have, there must be new employers and development of business, foreign direct investment. You can see directly how that links to Social Security. If we have a productive workforce, if there are jobs, and employers are contributing as they should, there’ll be more funds coming into Social Security.”
Louard continued, ““The Social Security Fund must have a good design in terms of the parameters…and we can speak to some of that in terms of the design elements and why it’s necessary to change some of those design elements. We must have efficient and effective administration systems, and I talked about transforming internally, and that we are operating administratively efficient, and that we must have good governance. Those are the four key areas. A healthy and growing economy, good design of the pension fund and the plan, efficient and effective administrative systems, and good governance.”
Louard added that an important part of the reform process is ensuring that the SSF can provide increased benefits and protections for beneficiaries, especially when they become pensionable.
“What we are saying is that a more equitable or fair calculation in terms of the average wage should be over your lifetime. So, we take the best seven years over your lifetime. So, it’s no longer within the last 15 years of your working life. It goes the other way as well.
“On that calculation, I could see why the designers did that. Because usually, you think that your salaries increase with age – let’s think of a civil servant, for instance. Those who retired at 55, who started joining the civil service before 2012, got their civil service, matured, [and] got to the top levels of the civil service at 55, but at the age of 55, they’re seven years away from 62. And they did not get an opportunity or a job that brought them back up to that level.
“So should they be ‘penalised’, if you will, in that 3-in-15-years calculation? Or should we look at the life of their contribution history and take their best seven years? So that’s one of the areas we’re looking at. Taking your best seven years over the life of your contribution history.”
Another key area will be diversifying the SSB’s investment portfolio.
While the board invests heavily in local projects to put the millions it collects to good use on behalf of its beneficiaries and the country, by law, there are limitations on the amount of money the body can invest outside of the Federation.
Louard said opportunities exist, however, to “rebalance” the SSB’s financial portfolio to further improve the SSF’s outcome in the long run.
“Right now we are invested in all of the different asset classes, so, fixed income, whether it be bonds, government bonds or corporate bonds, whether the equities, locally and regionally and internationally. But, I think what has to occur is the redistribution of the portfolio.
“Within the law the law restricts that we can only invest up to 10% of our portfolio outside of St. Kitts and Nevis. And there’s certain restrictions in the law that says that you have to go to the minister to seek approval for each incremental dollar and the like. But, there are some investment opportunities that are missed with that particular structure. So currently, we have 95% of our portfolio invested in St Kitts and Nevis… we have not maximised that 10 percent threshold that’s outlined in the law. So there’s opportunity for us to rebalance our portfolio, invest a little bit more overseas within our conservative risk profile, and get an incremental increase in terms of our investment return,” Director Louard explained.
Click this link to join the SKN Source WhatsApp group for the latest news and updates right on your mobile device! You can also follow us on Facebook here.
Be the first to comment on "SSB’s Director Louard talks long-term survival of SSF"