fp Turks and Caicos

Nearly 73 percent of people receiving pensions from the National Insurance Board will get an 8-percent increase in payments, while about 20 percent will see their pensions drop by 7.5 percent.

The increase applies to people who began receiving pensions before July 31, 2007. Both newly revised pension rates will take effect from Jan. 1.

NIB decided to reduce pensions for approximately 242 people receiving pensions after that date and through October 2010 because a “ministerial directive” that was not legally sanctioned gave them a 15-percent increase they weren’t legally entitled to receive.

Other changes announced by NIB include:

• Maternity grants will increase from $400 to $500.
• Funeral grants will increase from $800 to $1,300 for dependants, and from $1,200 to $2,000 for insured persons.
• Survivors will be guaranteed minimum pensions of $250 for spouses and $100 for dependents per month. These pensions were formerly calculated only on the pension of the deceased.
• Widow and widower survivor pension entitlement ages will both be age 50. Widowers were formerly eligible at age 60.
• Employment Injury Benefit will be extended to employees working beyond age 65 at a rate of 1.2 percent of the weekly wage up to $600 payable by the employer only for those workers.
• Temporary residents of six months or less will receive employment injury benefits. They were formerly eligible for only sickness and maternity benefits.

NIB also eliminated voluntary contributions for non-residents of the Turks and Caicos Islands.

Before this change, people who were no longer employed in the TCI could continue to voluntarily contribute to their pensions, including those who no longer live here. For example, a foreign worker who left the TCI after working and contributing to NIB for five years could pay for another five years and stop once 500 weekly contributions had been paid. At age 60, that person would be eligible to at least the minimum retirement pension for the rest of their life.

“This group of contributors has seen some growth over the years, and poses a potential risk for abuse,” the NIB said.

The changes were based on the findings of the December 2010 actual report on NIB that is conducted every three years.

The report says that 2010 year-end fund reserves were $150.8 million. During 2009 some 20,668 persons made contributions, and in March 2010, 1,189 persons were receiving pensions.

NIB has more than 60 percent of its portfolio invested internationally, and the declines on United States bond and equity markets severely affected overall returns. Investment income for 2008-10 was only $1.4 million, compared to a projection of $15.3 million, according to the report.

NIB took another hit when TCI Bank Ltd. was put into liquidation in 2010, causing a loss of almost $9.6 million, or 7.5 percent of total investments.

“While these losses do not materially impact the long-term solvency of the NI Fund, the investment experiences of the last few years should lead to changes in the due diligence process for local investments and a review of whether or not holding a large portion of the fund in international markets adds value to the TCI and the NI Fund,” the report said.

While the fund is in good financial shape now, the report says that if the average 7.9-percent contribution is unchanged, total expenditure will exceed contributions for the first time in 2025, total expenditure will exceed total income for the first time in 2031, and reserves would be exhausted in 2041.

Faced with similar prospects, many Caribbean countries have reduced pension benefits and increased contribution rates, the report says, and “several have also introduced automatic adjustment mechanisms that will ensure that insurance coverage and pensions remain relevant to both workers and pensioners with limited political intervention.”

The 78-page report prepared by Derek Osbourne, actuary of Horizonow Actuarial & Financial Consultants of Nassau, Bahamas, can be found on the NIB website at www.tcinib.tc and on the government’s website at www.gov.tc.

Click here to read the amendments to NIB pensions

Click here to read the government's press statement on changes to NIB pensions