The Social Security Board, is on a countdown to destruction, according to the SSB's financial experts. They say that in 3 to 4 years, the Social Security Fund will not be able to support the growing number of pensioners, unless there is an increase in the contribution.
Now, before you dismiss this as ploy by the SSB management to take more money from your pay to put into the fund, we think you should hear them out.
The last audit of SSB says that they collected around 80.1 million dollars in 2016, but they paid out 83.5 million dollars to persons who claimed for pension, sickness and disability benefits. That's a 3.4 million dollar deficit, and the projections are that the deficit will balloon to 11.4 million dollars at the end of this year.
So, the fund is being strained because payouts are growing, while contributions remain the same.
Today, after months of public consultations, the Management and staff of the SSB held a media mixer carefully make the case that there must be an increase. 7News was there with them for almost 3 hours, and here's an excerpt of the presentation that the Chairman made to carefully explain what has been happening in SSB:
Dr. Collin Young, Chairman - SSB
"I want to draw your attention to the colors. The blue is our total expenses at social security which is our operational expenditure plus the benefit payouts and you'll notice that in 2016, we collected 80.1 million - that's the green, in contributions, but we paid out our expenses - operational plus benefit payout was 83.5 million. So you see that in 2016 as it related to contribution revenue we are running a 3.4 million deficit in 2016."
"The projected numbers for this year is that we would collect from the contributions about 81 million in revenues for the year 2017, but notice that our overall expenditure, operational expenditure plus benefit payout is going to be 92.4 million meaning that we will actually have a 11.4 million dollar deficit for this year as it relates to contribution revenue versus total expenditure."
"Why is this happening? The number of pensioners are increasing between 8-10% per year. The fund is reaching its maturity. It's 35 year old. Those people who started to contribute all are now reaching retirement age and not only are they reaching retirement age, but they are also living longer and when they live longer, it means they collect a pension and ultimately that is why social security is there, because we need to ensure that for as long as they are alive we need to then provide them with that retirement pension."
"In 2003 we had about 4,500 or so people who are collecting a pension. As of 2016 notice we are about 9,800 pensioners. So we are more than doubled the number of pensioners in about 10 years and every year we can expect about 10% more so we are talking about close to another 1,000 people that may be on pension next year that we have to pay retirement benefits to and so you might be wondering well if we are running that kind of a deficit how are we able to meet our expenditure. It's because of 2 words "investment income." This is very important because one of the very common feedback we hear whenever social security invest its money whether it's in the utilities or whether it's in shrimp or citrus or tourism, is that well if you have all of this money, why is it then that you need to increase contributions? Just use the money. Well of course at social security if it wasn't for the investment income that we are receiving on the investments we've made we would not be able to meet our expenditures."
So, what's their fix for the problem? Well, Social Security is proposing an increase that will affect only 40% of the contributors into the fund. Those who earn up $339 dollars a week will not pay more.
Those who earn $340 weekly all the way up to $520 weekly, which is 40% of the contributors, would be asked to contribute a little more. If the plan is approved - and that is a big if - both the employers and the employees in that wage bracket will share the increase 50/50.
Here's how the chairman explained the way it would work:
Dr. Collin Young, Chairman - SSB
"The next slide is our proposal. For illustration purposes only and I want to be very clear here that this has not been approved, this has not been accepted by the board until we have had the opportunity to go and speak to the unions, to the government of Belize and to speak to the employers."
"The increase we are talking about will not impact any worker who is earning less than the current ceiling which is at 320. So all of these workers here and we know there are about 60,000 or so of them, about 60% of all the insured persons that contribute into SSB are earning less than $320.00 per week. So we are talking about a proposed increase that will impact about 40% of those people who contribute into social security. That's a very important point."
"The other point we want to raise is that if you are earning $320 - if are in this wage band, we are proposing an increase if you go to the other wage band of $1.60 per week. So if you are paying $9.55 now and this was to be approved, you will go from $9.55 plus $1.60 is your weekly contribution will now be $11.15. Under this split 50/50 the employer will also be paying the same $1.60. So the employers cost will go up from $16.05 to $17.65. Now you are not just paying - you are not getting nothing back."
The increased benefits that the Chairman was referring to are those which would go to contributors who would pay more.
But, if the public resists the proposal, the SSB is predicting that the investment earnings from the fund will only sustain the annual payouts for 3 years or so. Here's the SSB Actuary outlining what would happen if the contributors do not accept this plan:
Hernando Perez Montas, Actuary - SSB
"This year everything will be constraining every year and the following year more constraints until the breaking point come and that will be a very serious thing. Because the more we delay the amendments, the more drastic the amendment will require down the road. So every year after 2018 as the CEO just mentioned everything will be more constraints, investment, new investment will be constraints, the process will be delayed and so on and the breaking point will be. That shouldn't happen, because we are dealing with the welfare of the population of Belize. Economic security at the retirement of the population."
The SSB is hoping that the contributors will approve this increase, so that the Government can make legislative changes by February of 2018.