BASSETERRE St. Kitts, Novemeber 18th 2011 - It is established that our Social Security Board offers very generous benefits to our insured persons. Despite this fact, some persons try to take advantage of our good-will. We have found and stopped instances where insured persons, whilst on paid-vacation, also applied for sick-leave in an attempt to collect monies from Social Security; perhaps as a source of additional vacation income. Cases were also discovered where persons tried to receive sickness benefits the same day or the day after they were laid-off/fired knowing that they were unemployed at the time of claiming. Such persons are, in some cases “too smart for their own good”.
What they are unaware of, is that we are on to them. They also need to understand, that they actually can hurt themselves in the end. Some may say that they are “like kittens trying to fool a cat”.
Although our Social Security Board does not penalize persons who take sick-leave during their working years, EXCESSIVE periods of sickness can hurt your pension amount when you retire.
Social Security by design, assists persons during periods of medical illness, not only by paying a generous replacement rate of 65% of average insurable earnings, but if the period of sickness spans one week or more, we provide them with a credit week for each full week of sick-leave taken.
These credits are quite valuable since they contribute to the accrual of one’s pension replacement rate. Mr. Elvin Bailey has clearly outlined the pension accrual system and how it affects pension entitlements in several of his articles. From these articles we know that a person with 500 credit weeks at age sixty-two qualifies for an age pension of 30% of their monthly insurable earnings. However, a person who attains pensionable age and accumulates 1,040 contribution weeks would qualify for a replacement rate of 45%. Thus the more contribution weeks a person accumulates, the more pension points they accrue and, by extension, the larger the portion of their insurable monthly earnings that is paid to them as age pension.
Conversely, the more sick-leave you use, the more likely it is that you would earn credit weeks. These credit weeks may be used to calculate your average weekly earnings and hence your pension. Since each credit week will represent a weekly wage that is 65% of your average wage, a person can reduce the average earnings used for calculating their pension by up to 35%! That is, by frequently claiming sickness benefit (especially for periods that are longer than one week); one can reduce their pension by as much as 35%!
Sick-leave can hurt you in the long term. To see how, let’s examine the following scenarios.
Scenario 1:
1. Mr. David worked for twenty years earning $1,000 per week. He never had frequent periods of sickness claims throughout his working career. Then his average weekly earnings used to calculate his pension, would be $1,000.
Thus, taking into consideration his pension points and associated replacement rate, Mr. David would receive $450 per week as his pension for the rest of his life.
Scenario 2:
2. Mr. John also worked for twenty years earning $1,000 per week, but he frequently claimed sickness benefits throughout his working career, and to an extreme in the years used to calculate his pension. Then Mr. John’s average weekly earnings, used for calculating his pension would be $1,950 per month.
Thus, taking into consideration his pension points and associated replacement rate, Mr. John would receive $1,267.50 per month as his pension for the rest of his life.
Here we see how a difference of $350 in the average wages used to calculate pensions, resulted in a 35% smaller pension, FOR LIFE!
Since Social Security uses your three best contribution years from the most recent fifteen years to calculate your average weekly earnings, one can see how a lower average wage may adversely affect your pension allotment. Mr. David would have a pension calculated with $1,000 for the remainder of his life, while Mr. John would have a pension calculated with $650 for the rest of his life.
I am sure that we would all prefer to “lock in” the highest pension entitlement that we possibly can. So if you can help it, avoid claiming unnecessary sick-leave, before you pass the infirmity to your pensions.
By Donovan A.G. Herbert
Manager Research & Statistics
St. Christopher & Nevis Social Security Board
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