WASHINGTON, DC - The International Monetary Fund (IMF) has welcomed the “courageous steps” being taken by the Trinidad and Tobago authorities to improve the long-term sustainability of the public pension system.
According to the Ministry of Finance an approved pension fund plan is one approved by the Board of Inland Revenue which allows for an arrangement under which payment is made by an employee in trust to trustee or a corporation sole of any periodic or other amount as a contribution under the trust.
It is also a fund by an employer in respect of that employee in trust to the said trustee or corporation sole of any periodic other amount as a contribution under the trust, to be used, invested or otherwise applied by the said trustee or trust corporation, as the case may be, in accordance with the regulations for the purpose of providing to the employee commencing on retirement, a pension for life.
The Kamla Persad Bissessar government has been expressing significant concern over the long-term sustainability of the National Insurance System (NIS), with warnings that the fund could be exhausted by 2033-2034 if urgent reforms are not implemented.
The authorities say the system is currently paying out more in benefits than it collects in contributions, with an aging population and a shrinking workforce placing it under severe financial strain.
An IMF mission headed by Ana Guscina, which ended a two week staff mission to Trinidad and Tobago this week,said the country faces the twin pressures of a rapidly aging population that increases expected pension and healthcare costs and an aging energy sector that limits the potential for future revenue growth to cover these costs.
“The announced gradual increase in the retirement age and contributions rates – already enacted- will help delay the depletion of the National Insurance System (NIS) assets by 15 years,” said Guscina.
She said to strengthen the system, it will be important to improve compliance, broaden the contribution base, and embed automatic adjustment mechanisms in NIS legislation.
“Further reforms to the non-contributory pension system are also necessary to contain costs to the budget. Better integrating the contributory and non-contributory schemes and improving administrative efficiency would enhance equity and fiscal sustainability,” Guscina added.
