The latest actuarial report of The National Insurance Board (NIB) recommended that the retirement age be increased from 65 to 67.
The “Eleventh actuarial valuation of The National Insurance Board of The Bahamas as of 31 December 2018” noted that a new retirement age could reduce NIB’s short-term financial pressure.
It noted such an increase should be normally planned over a long period to not affect the current population which is close to retirement and acquired rights.
An increased retirement age was one of three options proposed to reduce NIB’s financial pressure.
Other options proposed in the report include the modification of the pension accrual rate and external funding for the assistance benefits.
“These options could be implemented separately or combined to enable the scheme to remain sustainable over the projection period without having to increase the contribution rate to the level mentioned above,” the report noted.
“… The contribution rate required to finance the pension benefits branch of the NIB over the projection period could be reduced by 2.3 percent, from 19.3 percent (GAP over 60 years under the base scenario) to 17 percent.
“In such a case, an increase of the contribution rate by two percent every two years, starting on July 1, 2022, could be sufficient to make the scheme sustainable over the projection period as long as the increases are maintained at least until July 1, 2032 (four years earlier than estimated based on the current design).”
The report also noted that an increase of the contribution rate by two percent — over the existing 9.8 percent — every two years starting on July 1, 2022, and ending on July 1, 2036, could restore the short- and medium-term financial sustainability of NIB.
“Because the contribution rate from July 1, 2036 is likely to not be sufficient in the future, it is strongly recommended that future contribution increases, and their frequency, be discussed by the stakeholders and become part of a funding policy,” it read.