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NIB costs 300 percent higher than regional peers

Staff cutbacks proposed as part of plan to ‘immediately’ begin reducing administrative costs
Guardian Business Editor

Published: Oct 04, 2013

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As a percentage of contributions, administrative costs at the National Insurance Board were found by the Ninth Actuarial Review to be over 300 percent higher than those of Caribbean peers, with the majority of costs relating to over-staffing, relatively high salaries and “generous” pension and health insurance plans.

A review of the National Insurance Board has proposed staffing reductions as part of a recommended goal of cutting back administrative costs to less than half of the proportion of contribution income that they presently represent.

According to the review, which covered the period 2007 to 2011, administrative costs at National Insurance Board stood at 21.6 percent of contributions as of 2011.

In Barbados, this figure is 5.2 percent; in Trinidad and Tobago, 4.9 percent. Meanwhile, in Canada and the U.S., costs are as low as 2.2 and 1.1 percent respectively, the review notes.

The review suggests that “significant reductions in staff” will be required at NIB if the organization which administers the nation’s social security programs is to achieve any financial savings going forward.

It is proposed that a 10-year goal of reducing administrative costs by over half – to 10 percent of contribution income – should be set and the board should “immediately take steps towards this”.

“A new Insurance Administrative System (IAS) is currently being implemented across NIB. While costly, this system is expected to significantly change the way that the NIB interacts with employers and customers and deliver a new and improved level of service. Annual amortization costs for the new IAS system will be in the order of $1 million. Therefore, to generate any financial savings from this investment, significant reductions in staff will be required.”

The review has highlighted a lack of long-term financial sustainability at the National Insurance Fund, and calls for a reduction in operating costs as key to enhancing sustainability and reducing the need for contribution increases in the future.

“While there are limitations comparing operating costs across countries given different contribution and benefit rules, geographical realities and methods of collecting contributions and paying benefits, the significant difference in costs for a national pension system between The Bahamas and the other countries shown cannot be dismissed simply by comparing size, rules and geography,” states the review, prepared by former actuarial consultant to the National Insurance Board, Derek Osborne.

The report notes that 70 percent of the board’s administrative costs are “staff related”. The total staff complement of 532 in October 2012 is around 100 more than it was in 2006.

“These high employment related costs are not only due to overstaffing, but also due to relatively high salaries (average increases of 6.2 percent over previous 10 years), [and] generous pension and health insurance plans.”

Osborne resigned from his post in May 2013, after 18 years. Earlier this year, the government spent nearly $900,000 on a forensic investigation into allegations against two senior officials at the agency.

The results of an independent forensic investigation into allegations against fired NIB Director Algernon Cargill and fired Chairman Gregory Moss were presented to Parliament in early May.

The probe into NIB began when suspended NIB Director Cargill and axed Chairman Moss fielded serious allegations against each other last year.

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