Increased Contributions Boost Social Security’s coffers

Director of the Social Security Scheme, David Matthias

The Antigua and Barbuda Social Security Board (ABSSB) is reporting an increase in yearly remittances by $13 million in 2018, over the previous year, 2017.

Even though the Board’s Director, David Matthias confirmed to OBSERVER media that  there has definitely been an increase in the receipts to Social Security, he is issuing a caution to pensioners and short-term beneficiaries who have been receiving their monthly payments late during recent months.

“People can’t just look at the increase, however, and think that would wipe away our monthly shortfall immediately,” Matthias advised.

“All of the efforts – to include the increase in the age of retirement and the economy expansion due to increased employment must all be considered.”

In 2017, the ABSSB increased its rate of contributions by 2 percent. Private sector contributions increased from 8 to 10 percent, while public sector contributions increased from 7 to 9 percent.

There has been a subsequent increase in the rate by a one-half of a percent in 2018 that will continue each year until 2025.

However, part of the problem affecting the timely payments, the director said, is the fact that there is no established fund or “pool” held on behalf of the beneficiaries.

“So, pensioners, for all intents and purposes, are dependent on persons who are currently working and also making their remittances in a timely manner.”

The director further explained that the current situation is due to the fact that a number of employers have been consistently late in remitting their payments to the Social Security, that consequently, beneficiaries, too, will receive late payments.

Monthly obligations of the Board stand at approximately $12 million, yet it only collects about $9 million, leaving a monthly deficit of $3 million.

Another problem that the ABSSB faces is that the yield from its existing investment products have been reduced over the years and have not since met the actuarial requirements of 6 percent for the overall portfolio.

“We have not recognised or realised that return on investment that we should have,” explained Matthias.

“The actuary has recommended a rate of return on investment should be somewhere in the region of 6 to 7 percent. In reality [however], we are seeing [returns of] 3 percent.”

Because the Board has an obligation to follow an investment model investing in low risk commodities (safety, liquidity and yield), many of its investments were made in commercial banking products that decreased over time to a modest 3 percent yield.

The former United States (US) Air Station property was turned over to the ABSSB in an asset swap designed to reduce the multimillion-dollar debt, which the government had to the statutory corporation.

Matthias said that this property has being yielding an average of 4.5 percent per annum.

For persons wondering as to when the Board will find itself in a state of equilibrium whereby the contributions can cover the obligations, Matthias said that the efforts being implemented now, “will not be realised now. It is for those retiring 2025 and beyond.”