The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The National Insurance Board’s (NIB) $104 million in collected contribution income at end-June has put it slightly ahead of schedule, or more than 50 per cent of the way, towards its $200 million full-year target at 2012’s mid-point.

Disclosing that the full-year target was based on the impact of the July 1 insurable wage ceiling increase, from $500 to $600 per week, NIB director Algernon Cargill told Tribune Business that its investment portfolio was “outperforming” both the Bahamian stock market and the Central Bank of the Bahamas.

Projecting that the Bahamian social security system would generate investment income similar to last year’s $80 million, Mr Cargill said NIB was continuing to see a slowdown in unemployment benefits claims as 2012 progressed.

Acknowledging that it had been difficult to reduce NIB’s administrative expenses as a percentage of contribution income, due to the fact that 70 per cent of these costs were tied to salaries, benefits and union contracts, Mr Cargill nevertheless said the organisation had “crossed a lot of the check marks” required to ensure the $1.6 billion reserve Fund’s future solvency and sustainability.

“2012’s contribution income is ahead of 2011, so we’re doing a pretty good job in collecting it,” Mr Cargill told Tribune Business.

“Year-to-date, we have $104 million in contribution income as at end of June, and that’s a pretty strong performance based on last year. We should see additional contribution income of $200 million for 2012.”

Mr Cargill attributed the increased contribution income, and full-year projections, to the beneficial impact of NIB implementing reforms suggested by both the 2005 Social Security Reform Commission report and subsequent eighth actuarial review of the Fund that was completed in 2006.

Both works recommended increases in NIB’s insurable wage ceiling to ensure income matched benefits, and bolster the reserve Fund’s sustainability. The insurable wage ceiling has now been increased from $400 in two steps, and will be subject to further rises every two years based on the Bahamian Retail Price Index.

Meanwhile, acknowledging that investments in NIB’s portfolio where returns were tied to the Prime rate were still seeing “some effects” from last year’s cut, Mr Cargill added: “Our portfolio is outperforming BISX and any returns from the Central Bank.”

Unemployment benefit claims, largely because many of those qualifying have exhausted the claims period, were continuing to “slow down”, Mr Cargill said.

Unemployment benefits paid out by NIB fell from $20.8 million in 2009, the first year they were paid out, to $8.8 million in 2010 and $7 million in 2011.

Disclosing to Tribune Business that benefits fraud was “very low” due to the checks and monitoring NIB had put in place, Mr Cargill indicated that the most frequent offences related to unemployment benefit and cases where claimants were actually working.

The NIB director, though, indicated that it remained a challenge to reduce NIB’s administrative expenses below 20-25 per cent of total contribution income.

“Every effort is being made,” he said. “But the majority of administrative costs are tied to expenses and agreements we have in place. Seventy per cent of administrative costs are tied to personal expenses and union agreements.”

Still, Mr Cargill said NIB had implemented many of the recommendations seen as critical to ensuring its long-term sustainability, and he expected the latest actuarial report - completed last year, but set to be released in 2012 - to confirm the Fund was “strong”.

“The last actuarial report indicated we had to improve collection efficiency, which I think we are doing; improve contribution income, which I think we are doing; and control expenses,” Mr Cargill told Tribune Business.

“We’ve crossed a lot of check-marks in the actuarial report, so we expect, based on the recommendations implemented, to see a very strong actuarial report from the end of last year.”

Mr Cargill, meanwhile, rejected assertions by John S George owner, Andrew Wilson, that NIB’s insistence on collecting past due contributions had been “a death blow” for the troubled retailer, saying its policy was first to always try and reach a payment agreement with delinquent employers.

Implying that NIB had been unable to agree a satisfactory schedule with John S George for the past due payments, Mr Cargill said these contributions were made for the welfare of employees, and as such the social security system had an obligation to collect them.

“NIB always negotiates arrangements with employers. It’s never our intention to force any business to close or lose their operations,” the director added.

But, if payment negotiations resulted in failure, Mr Cargill said NIB had a “responsibility to move to the next level” which was to prosecute in court.

“It has always been out intention and effort to ensure employers pay, as it can potentially deny someone a benefit,” Mr Cargill added.

“We would never cause the demise of any business, but we have a responsibility to all employees of the Bahamas, and as good stewards, to collect contributions that fall due. These contributions are held for employees, and enable benefits to be paid to everyone.”