FINANCE Minister, Dr Ashni Singh in this year’s budget presentation had announced that payment contributions to the National Insurance Scheme (NIS) will have to be increased by one per cent, and according to the entity’s latest annual report, it paid more than it earned by several hundreds of millions.

Dr Singh presented the annual report for 2011 to the National Assembly, and it states that while the entity earned $10.8B from its contributions, its returns on investments dipped below the $1B mark to just about $990M.

BENEFITS
Total expenditure for NIS in 2011, however, was recorded at $12.2B with more than $10.7B of that money going towards the payment of benefits.
This amount paid, according to NIS General Manager Doreen Nelson, represents an increase of 14 per cent when compared to the previous year.
NIS utilised just $1.4B of its earnings in 2011 to cover its administrative expenses while another $7.9B was paid over in old age benefits.
The scheme had earned $11.2B from contributions the previous year while its returns on investment had seen revenue totalling $1.2B in 2010.
NIS also saw a significant increase in employers being registered with 653 coming on board, while 619 were said to be small-scale employers, each with no more than 10 employees.

Services Sector
An analysis by industry has revealed that of the employers coming on board with the scheme, the services sector accounted for 260, with 85 from the commercial sector, while the manufacturing sector accounted for 56 and another 36 came from the forestry sector.
The Finance Minister, while presenting the 2013 Budget, indicated that the scheme will focus on advancing administrative improvements, reducing cost of operations, establishing systems for more effective management of the beneficiary database, and reducing the incidence of incomplete contributor records.
During this year, he said, the NIS will ensure that every contributor is supplied with a statement of contributions on record to ensure verification and reconciliation of all contributors.
In addition, the NIS will actively explore options for increasing compliance and widening coverage, especially among the self-employed population.
He also acknowledged that the challenges faced by the NIS are well known. He reminded too that for some time, actuarial recommendations have been before those charged with administering the Scheme.

STRUCTURAL DEFICIENCY
Dr Singh said that the dilemma has been the balance that needs to be struck between addressing the deficiencies of the Scheme while minimizing the impact on workers and their employers. “Although there is no doubt that administrative measures might help to improve the financial position of the Scheme, these could not possibly remedy in fullness the structural deficiency.”
He said the reality has been the growing benefits, a beneficiary population that is aging, and therefore in receipt of pensions and other benefits for more years than were anticipated at the time they commenced participation in the Scheme, and a contributing population that has not been growing as rapidly as it should, especially among the self-employed.
“The reality is equally that it would be difficult to devise a lasting solution to the challenges faced by the Scheme without confronting the need for an increase in the contribution rate.”
In that light he announced that with effect from June 1 of this year the contribution rate for both employed and self-employed contributors will be increased by 1 percentage point.
This, he said, will generate additional revenue for the NIS of approximately $890 million per annum.
“In order to ensure that the vulnerable feel no impact as a result of this increase, I wish to announce further that government will meet both the employer’s and the employee’s share of the increase in contribution payable with respect to employed persons whose income is not more than $50,000 per month…This initiative will cost the government approximately $215M per annum and will benefit some 58,300 contributors.”