Howai: NIB has billions
Friday, October 12 2012
THE NATIONAL Insurance Board (NIB) has “huge” cash reserves of “billions of dollars”, Finance and Economy Minister Larry Howai has assured the population.
As he wrapped debate on the 2013 Budget on Wednesday night, Howai rejected a claim by Opposition Chief Whip Marlene McDonald that the NIB – which supports more than 600,000 persons – was “broke”.
“That statement is totally false and misleading,” Howai said. “The fund is a long-term investment fund and, at times, as to be expected in funds like these, they would have surpluses and at other times they will have deficits.”
He assured the fund has a “huge” buffer of cash.
“The fund has a huge cash reserve amounting to billions of dollars and can meet all its obligations,” he said, pointing out the fund is very much “whole”. Howai acknowledged there are concerns in the long-run in relation to the fund stemming from the question of demographics and current contribution levels, a point he raised last week.
At a forum on the Budget, Howai suggested the population is not replenishing itself enough in order to ensure that levels remain adequate to support an increasing retired population. However, he told parliamentarians that the increase in contributions could deal with this separate problem.
“The point being made by the actuaries is that if nothing is done the fund can run into problems over the next three decades,” he said. “However, the arrangements being put in place by the Board include a change in the maximum insurable earnings, and an increase in the contribution rate which will take place over the next three decades.”
Of the 2013 Budget, he said, “We have started that process this year with a small increase to 11.7 percent from 11.4 percent in the contribution rate and that increase will go up to 12 percent in 2014.” Howai continued, “So Mr Speaker, we have already taken steps to address the current deficit in the fund and we expect that as with all long-term funds we will address and deal with these matters as the time progress.”
“Mr Speaker, I will want to say further that the increased benefits were recommended by the actuaries and they are well within what is acceptable and prudent for the Fund. So Mr Speaker, I think it is very important that the media walk away from here understanding and the public as a whole that the National Insurance Board is very whole, very solvent and capable of meeting all its obligations.”
Mc Donald referred to the executive summary of the Eighth Actuarial Review of the National Insurance System as of June 30, 2010. While the 2010 report forecast that this year there would be a deficit in terms of the balance between expenditure and contribution income, that forecast was based on projections existing up to mid 2010 and before later hikes in contribution rates.
There is as yet no official word on whether there was a deficit this year, or the extent of the assets available to cover such a deficit. However the trend has seen, judging from 2008 to 2009 figures where assets moved from $17. 1 billion to $17.4 billion, an increase of 1.2 percent, or $300 million in one year, according to the NIB’s 2009, Annual Report.
The same 2010 executive summary also notes that assets of the NIB are on the increase and will increase until 2026. “Financial projections reveal that system’s expenditure will exceed contribution income from financial year 2012-13,” the summary notes. It adds, “Total assets of the NIS will however continue to increase until 2026-27.”