Sustaining ‘generous’ pension concerns UWI principal
MONTEGO BAY, St James – Principal of The University of the West Indies, Mona campus, Professor Densil Williams, has raised concern over the sustainability of some benefits under the social security systems.
He gave “generous” pensions, which were offered by companies as far back as four decades ago when it was affordable, as an example.
He posited that some of those benefits may now have to be amended.
“…So while we think about governance, and all those things about sustainability, we have to also agree that decisions made 30, 40 years ago about our social security systems, especially, for example, generous pension benefits, these very generous post-employment benefits — and I could name a few of these companies that I sit on their boards — and look at 30, 40 years ago when they gave exceptionally generous benefits to their employees in order to secure their employment,” Professor Williams said.
“But we will have to look at those benefits now. And they will have to be revised within the context of our new environment that we’re now operating in with rising cost of living and lower paying jobs,” he added.
Speaking at the opening ceremony of the 31st Heads of Caricom Social Security Organisations conference at the Hilton Rose Hall Resort and Spa in St James last week, the business and management specialist argued that “we have to look at affordability because affordability then is not the same as affordability now.
“Those of you who study these kinds of areas and look in the private sector, even State sector, etcetera, a significant cost driver on our P and L [profit and loss] on our balance sheet is really post-employment benefits, pension benefits. And so these have been built up over years and years and years. And so the question, therefore, becomes: How do we balance those commitments that were made in those times when affordability was not an issue? With today, that affordability becomes a great concern. How do we balance those and how do we grandfather benefits that had agreed in the past and then new benefits that have to be agreed in the new environment?” he questioned.
Speaking after Professor Williams, Minister of Labour and Social Security Pearnel Charles Jr strongly urged “sister territories to take urgent steps toward any necessary reform measures that will ensure that our social security institutions receive the support that is needed to ensure sustainability and growth”.
For instance, he cited that in Jamaica the National Insurance Scheme (NIS) has been able to remain viable as a result of reforms which it has been undertaking since 2019.
“In Jamaica, our ability to respond appropriately to the increased demand for social support to our vulnerable population during the recent crisis has been due in part to the viability of the NIS. This viability has been secured through a programme of significant reforms, which the NIS has been undertaking since 2019, and which has been facilitated by the support of successive government administrations,” he added.
“The result has been that the scheme has not only been able to avert the negative forecast which it faced, it has been placed firmly on a trajectory of significant growth. What now remains is for us to address the need for strengthening of the administrative arm of the scheme, and I am confident that the deliberations of the week will assist in guiding us in this regard,” he added.
Professor Williams also argued that workers should be encouraged to invest in their future and not put all the burden on the employer and create a moral hazard, adding that “for sustainability and resilience, burden sharing is a very important concept that will now have to be introduced into social security systems that we are building for the future.
“But the premise of burden sharing does not only rest with the employee or the citizen, there is a bigger discourse that has to happen at the level of the macro economy as well. For if citizens are going to be able to afford their portion of the burden, we have to ensure that they are in a position where they can actually afford that portion that they’re asked to pay. As such, we need to have an economy that is strong and growing in order to facilitate the growth and development and equitable distribution of the gains from growth,” he warned.
The conference was held under the theme ‘Building sustainable and resilient security systems’.