Since the beginning of last year, the Social Security Board has been engaged in public consultations with Social Security contributors. SSB has been trying to convince the public to buy into a package of increased contributions to make sure the fund remains available to future generations.
The problem is that right now, social security is paying out more money than it is collecting. In 2016, it was running a deficit of 3.4 million dollars, but last year, that amount increased to just over 10 million dollars. That deficit is growing, and if there is no-buy in from the public to increase the amount of contributions, the Social Security fund will no longer be able to support the needs of the growing, and aging Belizean population. Simply put, it will crash.
That’s why SSB officials have been trying to convince the social partners to buy into their temporary fix, which will affect only 40% of the contributors to the fund. If it is approved, those who earn $320 weekly, all the way up to $520 weekly, would be asked to pay a little more. This would allow SSB’s total revenue to increase, and it will give the fund a little breathing room. But, for this plan to work, it needs public buy-in, and amendments to the Social Security Act by parliament.
So the evening, the Social Security Board hosted what they called SSB Connect, a 4-hour information session, where the staff and management of the organization invites the public to come out, and see for themselves that they aren’t exaggerating about this potentially big problem. 7News stopped by, and there were a few choice parts of the discussion which caught our attention.
Here’s how the SSB Chairman explained how balancing the financials has been a tough job, so that they can keep the fund viable, while pushing for this amendment:
Dr. Colin Young - CEO, SSB
"Look what happened in as early as 2021, the benefit payments alone are going to be higher than our revenue, just benefits, we're not even talking about administrative cost yet, okay. This is just what we'll payout to you and then if we do nothing, in 2023, we will paying about 122 million dollars in benefits but we'll only be collecting about 103 million. Now let's see what it looks when we put in the operational expenses. What I want to show you here, millions on this axis, this green is your revenue, we already saw that but now we're putting in the operational expenses in addition to benefits, that's this line and what you see and what ought to jump out at you that since 2014, the board has been running a deficit of 1.6 million in 2014, 3.5 million in 2016, this year 10.7 million."
From there, the CEO went on to demonstrate to real-life examples of beneficiaries who are currently getting pensions, and how 1 person can manage to collect significantly more money out of the fund, than they pay into it, over the lifespan of their employment:
Dr. Colin Young
"If you work for 10 years, you're going to make 500 contributions and at the highest end, you pay 13,000 dollars into the fund combined, you and your employer. Out of your pay check, you actually only pay 4,900. When you retire, you're going to collect 10,000 dollars a year and we know already I told you; a man would live 19 years on average after retirement at age 60 and a woman 23 years after retirement at age 60. So if after only 10 years of collecting pension, you've collected 49,000 dollars from social security but remember how much you paid in, you only paid in a total of 13,000 and only 5,000 from your paycheck, the rest comes from your employer. If you happen to be long lived, good genes and you live for 20 years, we will pay you 100,000 dollars. The amount yearly is not a lot but accumulatively it's huge. I asked my police and research team and they've worked very hard on this to pull some random person out of the database that are collecting pension that are active and I want to show you some of these cases. So these are fictitious social security numbers but the persons are real and the payments are real. So here we have an individual that paid into social security for 23.4 years, the total they paid along with their employer was 14,000 dollars. They have been retired for 13 years and collecting a pension and we have already paid them 110,000 dollars. Already paid and notice active, so this person is still collecting a pension. I'll pick another one, let's look down here, 22.2 years, they have contributed 12,600 dollars into the fund over that period of time, they have been retired for 13 years and collecting a pension and we have already paid them 108,000 dollars and counting."
So, we wondered, if the public gives approval to the Government to legislate this increase, how many years would it take before the Social Security Board has to come back to the contributors to ask for yet another increase? Here’s how the CEO answered that one:
Dr. Colin Young
"The longer we take, the set of action we are proposing becomes less valuable for the fund. When we first proposed this set of reform, when we said we wanted to take the rate from 8 to 10 percent January 1st 2020, that was the original proposal and then we would have done the ceiling from 2019 all the way to 520, one jump. If that had been approved and accepted by the partners, that would have given us between 10 and 12 years. Based on the consultations we know that's not going to fly, it's too much of a quick jump. In fact the chamber said in the letter sent to us, we understand that you need to do this increase but it's not our fault that you took 17 years to come back and ask for it. So don't expect that we would now do it in one year right? Feasible, so what we are proposing now, if we get it next year, gives us about 6 to 7 years before we are back where we have to look at increasing again the rates or also start to look at some of the other parametric reform like increasing retirement age, like increasing the number of contributions but I'm hopeful that in the period of time we'll get once we negotiate an agreement that we can work with the partners to agree on automatic trigger in the legislation that then takes it out of the political arena and once your net income gets this amount, you put in half a percent or .25 percent. We have been asking the chairman especially and I've been working with him to come up with what such an automatic trigger would look like in the legislation and that would come after we have some time to breathe.”
The CEO told the gathering that they have a series of meetings that they are scheduled to have with several of the social partners next week, to continue making their case for this increase.