In Trinidad: As Retirees Get Pension Increase, NIS Contributions To Go Up

14 October 2011

The marginal increase to go live within the month

Expect to pay more to the National Insurance system. Finance Minister Winston Dookeran says a “marginal increase” in payments to the National Insurance Scheme (NIS) would be able to finance the increase in NIS retirement pension from $2,000 a month to $3,000. And while he can’t give an exact date for this to take effect, he expects it will be no longer than a month. A new band from $8,300 to $10,000 will be added to the already 16 bands which exist. At the moment, an employee’s weekly contribution in this band is $68.94 with the employer paying $137.88 based on a contribution rate of 10.8 per cent. This puts their monthly benefit at $2, 475.70.

According to NIB’ Web site, by January 2, 2012, employees within this band will pay $72.77 with the employer paying $145.54 based on a contribution rate of 11.4 per cent. Dookeran, in a interview at his office, said the new band would create more contributions which would enable the NIB to fund the $1,000 increase in NIS pensions. This, he said, would bring equity to the system as the Senior Citizens Grant is also at $3,000.  With regard to self-employed individuals contributing to the NIS, Dookeran said it was up the actuaries to decide whether it was mandatory or optional. The Finance Minister was seeking to clear up issues which arose in the 2012 budget which he presented last Monday.

His personal view was that the budget dealt with the economic issues and built upon a plan presented in 2011—it increased revenue without affecting the tax structure, increased expenditure without putting the country’s macro-economic stability at risk and maintained the fiscal equation despite the payouts which had to be made. He said he was cognisant that the curfew hours of the present state of emergency were “likely to dampen economic activity” if sustained for a longer period of time. He said that he had received numerous e-mails from the business sector, in particular hoteliers, who lament a negative impact on their business “with combination of external factors.”

But Dookeran does not see any “significant changes” in investment in the last three months but is doubtful of the health of the economy should the Government opt to extend the state of emergency.
He said there was “no measure to increase revenue” beyond efficiency. He observed that the Government netted an additional $2 billion for the 2011 fiscal year because of efficiencies in the audit of energy companies and the efficiency of VAT collections. He said he expected  this to continue into 2012 to add to Government’s revenue streams. He observed that the US$75 oil price and the US$2.75 per mmbtu price for natural gas were “always a matter of judgment,” but that the Government hoped to boost Trinmar’s production to be able to maintain the same position as last year.

Expected energy revenues, he explained, enabled the Government to forego any revenues from the Land and Building Tax. The Government, he said, had assigned a legal team to look at the Land and Building Tax but there were many outstanding issues such as  rates, how to expand the net and how to include commercial buildings into the mix. He pointed out that no taxes were placed by the energy plants at the Point Lisas Industrial Estate. At the same time, the Government would hope to maintain their policy position to not let the population pay more. “This year we did not cater for it but it is an important issue to address,” he said. The recurrent expenditure, which was over 60 per cent of the budget, he said, was “inescapable” but that the Government could change the priorities of that expenditure to be more effective.

For instance, Dookeran explained that there were some abuses to the GATE programme so it will now be subject to pay-for-performance rules. “I don’t think there is much wiggle room to reduce recurrent expenditure,” he said. Questioned whether he’d be able to balance the books by 2015, Dookeran answered that it was imperative to do so. He said for 2012 the issue was investment was once this is achieved, the country will be on “that road path” toward balance with the caveat that it was also “subject to external developments.”

The Clico Trust

Before the proposed Clico Trust is established, legislation has to go before Parliament. Dookeran did not give a time frame for this to happen. He explained that the trust would be similar to NEL, often called NEL 2, which would hold the Republic Bank Ltd (RBL) shares. Clico policyholders would be given the option of redeeming their 11-20 year bonds for units in the Clico Trust. Dookeran said it was an innovative way to use market instruments and not put the Clico debt on the country’s books. He said the trust would take a while to finalise but that the Central Bank was ready to issue bonds. Further, he said he was not bothered by the legal challenges still before him by the Percy Farrell lawsuit being handled by Dr Claude Denbow, SC.


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