Barbados on the Brink: The Impending Catastrophe of Pensions and the Nation’s Desperate Struggle for Survival

A Crisis Within A Crisis – The Risk of Pensions in Barbados

Dr. David Estwick, the former Minister of Economic Affairs, delivered a chilling message during the Democratic Labour Party’s St Peter branch meeting at Mile-And-A-Quarter on Sunday. The topic of discussion was the precarious state of pensions in Barbados, painting a bleak future for retirement prospects. With a sense of urgency, Estwick shed light on the worsening dependency ratio and the alarming lack of preparedness from both the Government and the over-65 age group to confront the imminent challenges.

The Looming Disaster: National Insurance Scheme’s (NIS) Impending Collapse

Estwick’s concerns centered around the solvency of the National Insurance Scheme (NIS), which he deemed a national emergency. He warned that the Government of Barbados and the over-65 age group were inadequately prepared for the retirement crisis on the horizon. The NIS suffered significant damage to its balance sheet due to the 2018 domestic debt restructuring exercise, resulting in a loss of over $1.6 billion in debt-based assets. Furthermore, the COVID-19 pandemic compounded the problem by negatively impacting contributions and benefit payouts. Estwick painted a grim picture, revealing that the operating balance at the NIS would become negative by 2028, and its funds would be depleted within 12 years. The situation is worsened by poor compliance, with only about one in every eight self-employed individuals paying NIS.

Estwick’s Recommendations: Bold Strategies to Salvage the NIS

As the former head of the Infrastructure Committee of Cabinet, Dr. Estwick proposed critical measures to save the NIS from potential collapse. He advocated for the elimination of double taxation on pensions, urging the scrapping of direct taxes on individuals who continue working post-retirement. Additionally, Estwick recommended the introduction of a tax write-off of 150 percent on business investments for individuals over the age of 60. These strategies, he believed, would help stabilize the NIS and ensure its long-term viability.

The Burden Falls on the 16-60 Age Group

Given the gravity of the situation, Dr. Estwick stressed that those in the 16-60 age group, responsible for paying into the NIS, would bear the brunt of the crisis. He warned Barbadians to brace themselves for increased NIS contribution rates, which currently stand at 11.1 percent for employees and 12.75 percent for employers. Moreover, he suggested that individuals might need to work for extended periods, delaying retirement to ages ranging from 70 to 75, while receiving reduced pension benefits.