By Elvin Bailey
Despite our sustained efforts, there are still some misconceptions about Social Security within the public domain. Some of these myths are due to disbelief, some are due to ignorance of the big picture, and some are simply mischievous.
For instance, there are still persons who are of the view that once they become separated from a job, that a severance payment from Social Security becomes due. One such person wrote to us to document a “disappointment with the treatment received” because her claim for what she called ‘social security severance pay’ was not honoured, despite applying for it in early 2009. Let me take this opportunity to explain once again the role of Social Security in the Protection of Employment Act No 6 of 1986.
Each employer pays a 1% of the employee wages into the Severance Fund that is held by the Government. The money is paid into Social Security, using the collections platform and capabilities of Social Security. Social Security in turn pays it to the Federal Treasury. It is an arrangement for which Social Security receives a modest agency fee. However, we do not administer the Severance Fund: it is the Government, through its Labour Department, to whom the requests must be made.
Social Security collaborates with the Labour Department, when requested to do so, to provide a record of wages. This is important because the severance payment is based on wages actually received, according to an established formula. You too, can request a copy of your wages from us, but it is the Department of Labour that should provide the applicant with the appropriate formula.
Another myth being promulgated concerns the Funeral Grant offered by Social Security. Every time that it is mentioned, the figure is scoffed at; ‘dat cyarn bury nobody’ the audience would say. But it was never intended to. Rather, it is an assistance to the relatives/caretakers of the deceased insured person to help with funeral expenses. Insurances never offer 100% cover!
Funeral grant adds up, however. Annual payments of funeral grant in the recent past hovers around the EC$500,000 mark, with EC$507,000 being paid in 2006. This is not a sum to be sneezed away! The person who recommended that Social Security should stop this payment and enter into the funeral business itself may have been on to something after all!
Another issue that some persons just will not let go is the issue of lending money to the government, especially after the release of the latest $5million to the NIA/NHLDC. The truth is that such loans are investments, and investment returns have now become the second largest source of income for the institution, and is growing.
Let us put this into perspective. Since the beginning of our Fund, approximately $320Million (roughly a third of all of our assets) has been invested with government, and currently our government loans portfolio is marginally over $40M. Last year (2009), we realized EC$55M in interest, including interest from the government, while our collection from monthly contributions was $71million, thereabouts. It is this interest that, in large part, has allowed us to be what we are today; and lowered our benefit-to-collections ratio from $0.60 per contribution dollar to $0.30 per total dollar collected in 2009.
In fact, when we consider that all the contributions collected from 1978 up to 2007 amount to EC$949Million, we realize that interest alone yielded roughly EC$539Million (or 36%) of the total income. St Kitts & Nevis – including Government - is our single largest source of investment income. Do you still consider it imprudent to invest in ourselves?
Similarly, we take issue with those who argue that our administrative cost is high. It will seem high if the investments are not spread out over the life of the project; and it will seem high if we were operating an inefficient organization. But we are not; and we wouldn’t be ranked No. 2 in the entire CARICOM if we were inefficient. Let me remind our population that except for one country which offered an unemployment benefit, we would have been No 1; and if you consider that pension age in that country is 65 years and climbing up, then we can claim to be the No 1 system.
My final point for consideration is directed to entrepreneurs who are in the mid-to-late fifty’s age range, and who do not have a lot of contributions in the system. They espouse the view that payment of will not matter much since they will not qualify for a pension anyway. True, but they will qualify for either an age grant or an elderly refund, and they will continue to enjoy short term benefits. Let me inform us all that EC$315M has been paid out in benefits (including pension) between 1978 and 2009. Everybody can benefit.
An age grant is calculated in a way that yields a lump-sum payment that is always greater than the amount paid in. I have seen individual payments that approach the $100,000.00 mark. Such payments can be used to purchase annuities.
The point must be made that everybody wins with Social Security. The question is: how much of a winning will you qualify yourself for? Come in. Let’s talk!
(Note: figures are unaudited).
