SSBís New Deal: What it means for you
On July 15th, 5 weeks from now, all workers who are registered with Social Security will notice that their mid-month paycheck will be a few dollars less than what they are used to. That's because employers will start to deduct more to comply with the newly approved social security contributions.
It's the result of the 2-year-long public consultations that the Social Security Board has been having with Belizeans countrywide about the Social Security Fund, and why they need you to contribute more to keep it financially sustainable.
As we've reported, Social Security is currently paying out more money than it is collecting, and so, SSB has had to liquidate more and more of the reserves it has generated through investments. That's an operational deficit in the millions, and if the current contributions you make don't increase, the Social Security Fund will no longer be able to support the needs of a growing, aging Belizean population. Simply put, it is on the brink of collapse.
And so, the SSB officials acted 24 months ago to start that off. After discussing with many cross-sections of the population, a final consensus was reached about how much exactly they want you to increase your payment to. The necessary amendments to the Social Security Act have already gone through, and now, it's only a matter of time before it takes effect.
To prepare Belizeans for the change, the SSB officials held a press conference to share all the details, and our News Team was there. Daniel Ortiz has that story:
Daniel Ortiz reporting
This morning at the BCCI's McField Conference Center, all seats were occupied by citizens, both employers and employees alike. They were there to hear the officials at the Social Security Board explain what is being expected of all 108,000 contributors of the Social Security Fund come July 1st, 2019. It's been 2 years since SSB embarked on a campaign to show Belizeans why they need you to be okay with paying more of your salary into the fund.
Dr. Colin Young - CEO, Social Security Board
"We have done this presentation literally, probably close to a hundred times, as we have traversed the length and breath of the country, from Corozal, to Punta Gorda, to Cayo, to San Pedro, talking about why is it that we need to get an increase in the contributions."
If this increase is not done now, Belize's social social security infrastructure will start to collapse under the weight of the beneficiaries who are in need of it. If that happens, there will no more sick benefits, no injury benefits, and no maternity leave benefits - to name just a few. And if the SSB doesn't stop operating in the red, eventually, there will be no money to pay your retirement pension, when you finally decide to retire at age of 60 or 65.
Dr. Colin Young
"The fund is running out of money. For those of you looking at this year, if we spend all of the money that is budgeted, relative to all of the income we will collect, we will be short 1.6 million dollars. That means that we are at the stage this year that the fund will have to liquidate investments to meet all of its costs. [That] simple means that we have to got to the cash deposits we have in the bank, and say that we will need 1.6 million dollars by the end of the year, for us to meet costs. If we do nothing, continue with business as usual, then next year, we'll have to liquidate 13 million dolllars in assets, and year after that, 26 million, and the year after that - you get the picture. This simply cannot be allowed to happen."
So, that's the reason "why" you must pay more out of your paycheck to SSB starting in a few weeks time.
Here's what the Government-approved increases that you and your employers will be paying to social security when the changes take effect.
Dr. Colin Young
"We're changing the rate, over here from 8%, to 8.5% this year, another half a percent next year, and 1% the following year. The Actuary had recommended that we need to do a 2% jump, and to take the ceiling from $320 to $520, but when we did the first rounds of consultations that was rejected because of the financial cost to both employees and employers. The Chamber essentially had said, we understand your situation. We know that we have to do an increase, but it's untenable to come to the business community, after 17 years of doing nothing, and want to increase in one swipe to 2%. So, they didn't agree to the 2% increase. They unions had agreed to it, but they didn't want to move to move from the allocation between employers and employees. So, we had to go back to the drawing board. And the drawing board yielded this proposal that was accepted by the social partners, and later approved by the Cabinet of Belize."
These increases will take place in 3 phases starting July 2019. The end goal is to get all contributors to increase their contribution from 8% to 10% by July 2021, but gradually, so that you, the beneficiaries, won't immediately feel the pinch.
But, in exchange for paying more into the fund, SSB is also providing a big incentive to workers who earn more than $320 dollars a week. Previously, that's all that Social Security was prepared to ensure on your behalf, and 80% of that amount was what employees would collect from a sickness benefit claim. With the new changes, they are increasing the total amount of your salary that they ensure.
Dr. Colin Young
"When we talk about the ceiling, what we're referring to is the maximum amount of your salary that we ensure. So, we say that $320 is the ceiling, from the perspective of SSB, we only ensure the first $320 of your salary. Even if you're making a lot more than that per week. And the benefits are indexed to that. So, we pay by law, 80% of the average insurable weekly earning. So, if you're sick, it means that 80% times $320, that gives you $256, okay. That's how it's calculated. What we're doing, essentially, as part of the proposal, is that now we're extending this ceiling, the maximum insurable earning down to $520."
But, the most important benefit of all this is that Belize's Social Security infrastructure will continue to function. According to SSB, the fund will continue to provide Belizeans with the biggest investment return on their money paid over their lifetimes.
Dr. Colin Young - CEO, Social Security Board
"The return you get on Social Security, beats it any rate of return you can get on putting that money in any banks. Look at these numbers on the screen. Here's somebody who worked for 23 years and 4 months. After that entire time, they had paid in - total, including the employee and the employer portion combined - $14,000 into Social Security. That's the total contribution. When they reached retirement - and these are real people by the way, and these are not extreme examples. These are typical examples. You notice the person has retired for 13 years, collecting a retirement benefit of $163.36 per week. So, we have already paid this person a $110,000 dollars. But all we collected from him or her is $14,000."
"After 2 years to 3 years, every insured person collects ever dollar they've ever paid into Social Security."
"The pension represents the single largest cost to Social Security system, but our obligation is to ensure that when you retire, there's money to pay your pension."
"We will have to increase contributions again in the future."
Pay More Now, Get More Later
As you heard in the story, with these changes all contributors who earn more than $320 a week will get a bigger portion of their salaries insured. That means that if you should fall ill, and you need to make a sickness benefit claim, you will get a bigger payout.
It increases through the 3 phases all the way up to $520 by the year 2021, but, there is another benefit that comes with paying more money into the fund. The Social Security Board CEO told us that your retirement benefit will also be greater. Here's how he explained why:
Dr. Colin Young
"Your pension benefits up also increase. Right now the maximum pension that you can get from SSb is $192.00 per week and that is determine by a formula that is also in the legislation, but there are 3 major components; 1) you have to have a minimum of 500 contributions; 2) the total number of contributions matter. Why? because the law says that you need 500 to qualify and then the next 250 contributions - remember 50 is about 1 year. The next 250 contributions your pension rate goes up by 2% and then every additional year that you work it goes up by 1% until its max at 60% and the 3 best years of your salary. You put that into the formula and you get your pension rate which is $192.00 today. It's been that way since 2001. That is why a lot of people complain about adequately of benefit, because they are saying well how do you expect me to live on $192.00 a week when the cost of living in 2001 and today are very different. But remember its index based. Your pension is based on how much you pay and at the ceiling."
"Now that we are increasing the amount of your salary that we are insuring, we are able now to give you greater benefits, as an employee point of view. Now your pension after paying these new rates after 3 years goes up from currently $192.00 a week to $312.00 a week. That equates from a maximum pension $9,000 to $16,200 a year. So one way to think of it for paying an additional $13.85 a week, your pension rate goes up by almost 60% for those who have worked for a long time and have paid above the ceiling. Again, if you put $13.85 in your credit union account at 5% interest you will see that the rate of return, because remember we will pay you until you die and if you die and you have, in case of the man, then you have your spouse and your children that will collect even if you weren't at age 65, as long as you qualify for the pension."
So to recap, by 2021, the lowest income earners will have to pay $5.50 into the Social Security Fund every week. The employer will pay $4.47 and the employee will pay $1.03. At the SSB ceiling, which is $520, a total of $52 will be paid into the fund weekly. Of that amount, employers will pay $28.60, and employees will pay $23.40.
You can also expect that SSB may come back to the general public for another increase in 10 years, to keep up with the growth of the population.