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Jun 11, 2019

S.S.B.’s Contribution Reforms Takes Effect July 1st

Cabinet has approved S.S.B.’s proposal to reform its contributions and pension scheme. The Social Security Board embarked on a countrywide consultation process two years ago to seek support for its proposal. As it stands now, the fund is approaching the ‘period of equilibrium’ where total income equals total expenditure. So in order for the fund to stay afloat, revenue needs to be higher than its cost and that’s where the reform plays a role. Under the new scheme, employees and employers will pay a higher social security contribution which will result in employees receiving greater benefits.  It’s a move that needs to be done, especially since the last contribution hike was in 2003, seventeen years ago. Today, the S.S.B. hosted a media brief in Belize City where the C.E.O. answered all the questions. News Five’s Hipolito Novelo reports.

 

Dr. Colin Young, C.E.O., S.S.B.

What you see very quickly is that the Fund is running out of money.”

 

Hipolito Novelo, Reporting

In fact, if the Social Security Board exhausts its budget for this year, relative to the total income to be collected, the fund will fall short of one point six million dollars.

 

Colin Young

Dr. Colin Young

“That means that we are at that stage this year that the fund will have to liquidate investments to meet all of its cost.  Simply means that we will have to go to the cash deposits that we have in the bank and say that we will need one point six million dollars for us to meet the cost. If we do nothing and continue with business as usual then next year we will have to liquidate thirteen million dollars in assets.”

 

And the year after that, S.S.B. will be forced to liquidate a projected twenty-six million dollars. The figure increases every year.

 

Dr. Colin Young

“This simply cannot be allowed to happen. S.S.B. is too big for this to happen to the Social Security system. Hence the reason we are here talking about a contribution increase.”

 

For the past two years, the S.S.B. has been hosting nationwide consultations regarding its proposal which has been approved by Cabinet for its contributions reform.  The S.S.B. is critically close to what experts call the ‘period of equilibrium’ where total income equals total expenditure.

 

Dr. Colin Young

“When the scheme starts to reach maturity meaning that all the persons who started to contribute in the beginning, are now retiring. They are entitled to a retirement pension and that number increases each year. We are at the point that every single person who started to work in 1981, 1982, 1983, those persons are not retiring and are retiring to ten to thirteen percent per year.”

 

With the retirement age set at sixty, and mandatory at sixty-five, C.E.O. Dr. Colin Young says the list of retired persons grows by more than one thousand per year.  The last time that contributions increased was in 2003, seventeen years ago. In order to avoid a financial crash, contributions need to be increased once again.

 

Dr. Colin Young

“What of the things that we have to know about is how long people live because that is how long our liability extends, not only just to you but also to your survivals.”

 

On average, in Belize, men live nineteen years beyond the age of retirement; women live twenty-three more years.

 

Dr. Colin Young

“It means then that we would be paying a man a pension for at least nineteen years on average and a woman twenty-three years on average. And because of the law and provides for survival benefits when the spouse, or let me say it correctly when the husband of the wife passes away, the wife is automatically qualified for the survival pension of the husband and she will get that pension until the remarries or she dies.”

 

The increased contribution will be phased through 2021. Currently, the contribution rate stands at eight percent. The proposal is to increase it by point five percent in 2019. It should be nine percent in 2020 and ten percent in 2021. According to Dr. Young, increased contribution comes with greater benefits.

 

Dr. Colin Young

“At the high end, somebody who has worked for thirty-five years and paid the highest rate, they would have paid no more than thirty thousand dollars in social security. Their minimum pension would be just shy of ten thousand dollars which means that they will collect every single dollar that they have ever paid into the fund after only three years of pension. So essentially what is happening; we are taking the eight percent rate and the ceiling that is today to this year July first to eight point five percent and the ceiling to four-forty. Then next year we do another half percent in the rate and we go to four-eighty. Again, remember the ceiling is the amount of your salary that is insured. Then we go to ten percent to five twenty. So we will arrive in 2021 at the two percent increase in the rate and the ceiling of five-twenty. The return you get on paying Social Security beats any rate of return you can get and put that money at any credit union or bank.”

 

The reform which takes effect on July first is expected to ensure the fund’s short-term sustainability. Besides nationwide consultations, there was also engagement with the tripartite partners which include the private sector, and the N.T.U.C.B.  Hipolito Novelo, News Five.


Viewers please note: This Internet newscast is a verbatim transcript of our evening television newscast. Where speakers use Kriol, we attempt to faithfully reproduce the quotes using a standard spelling system.

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