by Rick Lowe (http://www.weblogbahamas.com)
The Nassau Institute recently wrote about the combined 84.1% increase in the NIB payroll tax (see the article here...)
The Nassau Institute commentary came about as a result of the recently released actuarial review of the NIB fund that once again informed the nation that the fund will depleted on its present course.
So several recommendations were made in order to preserve the NIB retirement benefit for future generations including raising the ceiling from $400 to $600 and the percentage paid in from a combined total of 8.8% to 10.8%.
And in the Tribune Business of Monday, September 14, 2009 Mr. Dionisio D'Aguilar, the former president of the Bahamas Chamber of Commerce, is quoted as saying that the politician's should "Use Parliament to curb NIB Spending".
I seldom disagree with him, but this is a case in point.
One of the main contributors to the NIB and its inevitable slide into bankruptcy is parliament. The political class use the fund for political brownie points like raising the amount of pensions or borrowing the money for building government buildings outside the parameters originally envisioned.
The knock out blow that ensures a bankrupt future for the NIB is the way it is structured. It is a pay as you go fund, where money paid in by today's workers go to pay today's retiree's.
I remain convinced that contributions paid in by a worker should be held in their name until retirement when they collect what they saved. Principal and interest.
Now that leaves today's retirees unfunded, but that can be rectified through a proper allocation of public spending. Chile did it, so why can't we?
If the country just continues to tweak the NIB at the edges it will become the travesty their own actuarial reviews indicate sooner or later. Fundamental change is necessary.
