First Published in the Trinidad Express on October 13th 2016
Pension Problem Ahead
Do you have your watch on? If you do, take a look at the second hand. Every second, you read this, you are ageing. One day you will be old. Except, of course, if you choose the alternative.
Not everyone has the choice, of course.
But those who do, usually opt to continue living…the urge to survive, even when facing health problems, poverty, loneliness or the resentment of those around you waiting for you to die so that they can inherit your resources or possessions apparently is built into your DNA until some inner instinct tells you it is time to give up.
One of the difficulties we face as we age (if we age, that is) is that bodies become more frail and that medicine has not caught up with our fantasies about avoiding physical ageing. As a result, keeping a body intact while getting old is expensive, and the medical and pharmaceutical industries make it more expensive every year.
This is especially onerous when we cease to be an income earner and become a pensioner.
The NIS has pegged our retirement age at 60, and most companies follow suit.
Do you know who it was that decided on a retirement age for workers? It was German Emperor Otto Von Bismark in 1881, except he pegged it at age 70. And it was only to be paid to those disabled or so enfeebled by age as to be unable to work. Which seems fair enough.
It took many years before that was reduced to age 65, and in some countries, to 65 for men and 60 for women, meaning that women’s pensions would be less than those of men who, having worked longer, contributed more and therefore earned a higher pension. Women felt discriminated against, but so what? No one listened to women, any way, as they were always complaining. Too besides as those who made those decisions said, women could live on less than men could.
Then, someone did listen and the retirement age in T&T moved to age 60 for both men and women. So now, if we have worked and contributed to National Insurance, which is stipulated by law, you can retire at 60 with a pension of $3000,00, or if you have never earned an income and never contributed $3500.00.
Never having earned an income is different from never having worked…women with children and a home to maintain, for example, work harder than most men but do not earn an income.
But, but, but, but…life expectancy in T&T is 68 years for men and 75 years for women. So if you retire at 60 and live for another eight to fifteen years while money loses its value at approximately, my investment people tell me, 7 % a year, the older you get the less you have to live on. As one bright young insurance salesperson trying to sell us a company private pension plan said to me: “if you are unlucky enough to live to be 90, you won’t be able to do much …”
I gaped at her audacity, but I was a lot younger then and didn’t think I was ever going to get old.
Now that I know better I see that the current national social security prognostications are that by the time today’s 60 year olds are 75, in 2031, the NIB will be unable to pay pensions… This year, the NIB is paying pensions to 150,000 people over 60. Multiply that by $3000.00, then add those receiving $3,500.00 without having contributed …I do not know how many of them there are and you get an idea of what the problems will be. But added to those figures will be the pensions of all public servants who have never been asked to contribute to their own pension funding
And in a shrinking economy we begin to get an idea of the problems the country will be facing in the next two decades.
The obvious answer, of course, is to increase the pensionable age and to ensure that all pension schemes are tied to contributions. At 60, most working people are just hitting their peak years. To force them into retirement seems both cruel and irrational. An optional, slightly enhanced retirement seems to make more sense. Even Otto Von Bismark, giving 70 as the retirement age was only dealing with the realities of his generation where people at aged 65 were old. Now the age of 65 is the new 50, full of health and vigour…
So there are two issues to be resolved. One is the ability of the Government Pension architecture to sustain the current pensionable age. Where people contribute, with prudent management and intelligent investment policies, it should be sustainable. For the non-contribution systems, there is a problem. This is not just a problem in Trinidad & Tobago. It is a problem world-wide, where pension systems are going belly up.
Pensions from the NIB were never intended to be the sole income for ageing people. Employees were expected to provide for themselves through savings and, where they were lucky private pension schemes provided by their employers to which they jointly contributed. Only government employees in the beginning did not have to contribute to their own employment –related pensions.
Those without state employment or private pension schemes too often thought their children would mind them when they got old. Now, however, children are often living abroad and out of touch or unemployed themselves, looking, in their 40’s and 50’s for help from their parents.
We have a problem. It is not a problem just for the government. It is a problem for all of us, and particularly for people who will be retiring in the next twenty years. What do you future pensioners suggest that we do?
DIANA MAHABIR-WYATT
Chairman – PMSL
