Source document: https://docs-lawep.s3.us-east-2.amazonaws.com/1694234036105.pdf (Barbados)
I | NATIONAL INSURANCE & SOCIAL SECURITY 15TH ACTUARIAL REVIEW (2012 to 2014) Unwala House, Queen Street Nassau, Bahamas May 30th 2017 Dr. Justin Robinson Chairman National Insurance Board Frank Walcott Building, Culloden Road, St. Michael, Barbados, W.I.
Dear Chairman Robinson: Re: 15th Actuarial Review of the National Insurance Fund, Unemployment Fund and Severance Fund of Barbados It is our pleasure to present to you the report of the 15th Actuarial Review of the National Insurance, Unemployment and Severance Funds of Barbados prepared as at December 31st, 2014.
Yours sincerely, Morneau Shepell Ltd. Derek Osborne, Fellow, Society of Actuaries Partner Marcia Tam-Marks Fellow, Society of Actuaries Partner © Morneau Shepell 2017 II | NATIONAL INSURANCE & SOCIAL SECURITY 15TH ACTUARIAL REVIEW (2012 to 2014) July 31st, 2017 Senator, The Honourable Dr. Esther Byer-Suckoo Minister of Labour, Social Security and Human Resource Development Ministry of Labour, Social Security and Human Resource Development 3rd Floor, West Wing Warrens Dear Minister,
Dear Minister, review of the National Insurance Scheme be conducted every three years, I am pleased to submit the report of
 st , 2014.
Yours sincerely, Dr. Justin Robinson National Insurance Board IV | NATIONAL INSURANCE & SOCIAL SECURITY 15TH ACTUARIAL REVIEW (2012 to 2014) IV | NATIONAL INSURANCE & SOCIAL SECURITY 15TH ACTUARIAL REVIEW (2012 to 2014) of the National Insurance Fund, Unemployment Fund & Severance Fund of Barbados as of December 31, 2014 Table of Contents Abbreviations and Acronyms
 ..................................................................................................................2 Introduction ...............................................................................................................................................3 Executive Summary ..................................................................................................................................4 Chapter 1 National Insurance Fund Experience Since the 14th Actuarial Review ................7 1.1 Amendments to Act and Regulations
 .........................................................................................7 1.2 Economic Experience.................................................................................................................... ..7 1.3 National Insurance Fund Experience ..........................................................................................8 1.4 Experience Compared With Projections of 14th Actuarial Review .................................. 10 1.5 Investments .................................................................................................................................... 10 1.6 Subsequent Events ........................................................................................................................ 12 Chapter 2 Assessment of Performance and System Design ....................................................13 2.1 Historical Performance, 1967 – 2014 ....................................................................................... 13 2.2 Meeting Policy Objectives ........................................................................................................... 14 Chapter 3 Best-Estimate Projections ............................................................................................18 3.1 Population Projections ................................................................................................................ 18 3.2 National Insurance Fund Projections ....................................................................................... 20 3.3 Comparison With Results of the 14th Actuarial Review .................................................... 24 3.4 Sensitivity Analysis – NIS Factors .............................................................................................. 24 3.5 Sensitivity Analysis – Government Factors............................................................................... 25 Chapter 4 Alternative Scenarios
 ................................................................................................... 26 Chapter 5 Balancing Adequacy and Sustainability ...................................................................... 28 5.1 Coverage ........................................................................................................................................ 28
28 5.3 Financial Sustainability .................................................................................................................. 30
30 Chapter 6 Unemployment Fund ....................................................................................................34 6.1 Unemployment Fund Experience .............................................................................................. 34 6.2 Subsequent Experience
 ................................................................................................................ 36 6.3 Unemployment Fund Investments ............................................................................................ 36 6.4 Short-term Unemployment Fund Projections ....................................................................... 37 Chapter 7 The Severance Fund ..................................................................................................... 38 7.1 Severance Fund Experience
 ........................................................................................................38 7.2 Subsequent Experience ............................................................................................................... 39 7.3 Fund Investments .......................................................................................................................... 39 7.4 Future Severance Payments ........................................................................................................ 40 Chapter 8 Good Governance .........................................................................................................41 8.1 NIS Governance Structure ..........................................................................................................41 8.2 Good Governance Guidelines .................................................................................................... 41 Statement of Actuarial Opinion ...............................................................................................44 References ...........................................................................................................................................45 Appendix
Appendix A Appendix B Methodology, Data and Assumptions ........................................................54 Appendix C Projection
 Results – Alternate Scenarios ................................................ 60 Appendix D Income, Expenditure and Reserves, 2012–2014 .....................................67 Appendix E 1 | NATIONAL INSURANCE & SOCIAL SECURITY 15TH ACTUARIAL REVIEW (2012 to 2014) Abbreviations and Acronyms GDP GOB IE IPS ISSA IT NI NIB NIF NIS OECD PAYG TFR Gross Domestic Product Government of Barbados Insurable Earnings
 Investment Policy Statement International Social Security Association Information Technology National Insurance National Insurance Board National Insurance Fund National Insurance Scheme Organisation for Economic Co-operation & Development Pay-as-you-go
 Total Fertility Rate 2 | NATIONAL INSURANCE & SOCIAL SECURITY 15TH ACTUARIAL REVIEW (2012 to 2014) Introduction The Barbados National Insurance Scheme (NIS) began operations on June 5, 1967.
It currently covers all
employment earnings up to a wage ceiling and are paid by employers, employees and self-employed persons.
invested locally, regionally and internationally in various types of securities and properties.
This is the report of the 15th Actuarial Review of National Insurance, Unemployment and Severance Funds and it is being prepared as of December 31, 2014, three years after the 14th Actuarial Review.

Section 34 of the National Insurance and Social Security Act requires that such reviews be conducted at three year intervals.
The delayed preparation of this report is due to administrative system issues which affected the collection of timely The main purpose of periodic actuarial reviews is to determine if the social security system in Barbados protection.
Where considered necessary, recommendations aimed at ensuring that these objectives can be achieved for current and future generations are made.
should be noted that these projections are dependent on the underlying data, methodology and assumptions concerning uncertain future events and that the outcomes and eventual experience will most likely differ, possibly materially, from that indicated in the projections.
Therefore, in accordance with the National Insurance Act, periodic actuarial reviews should be conducted.

The next Actuarial Review of the three Funds is due as at December 31, 2017.

Data issues delayed the preparation of this report and also affected the quality and reliability of some data that was provided.
In some instances, data relationships noted from previous actuarial reviews helped determine of the 14th Actuarial Review resulted in some amounts presented in this report being different from those presented in the previous report.
Census, labour market and economic data published by the Barbados Statistical Service have also been used as inputs into assumptions and starting points for projections of the population, labour force and economy.

In 2016, the IMF raised concerns about data inconsistencies and the credibility of some national statistics.
rates and years when key events are projected to occur, they do not, however, materially affect the general outlook for the three Funds and the conclusions drawn from the results presented.
The Actuary visited Barbados in June 2015 and December 2016 and held discussions with the Board, the Director, He wishes to thank Mr. Ian Carrington - Director, Mrs. Jennifer Hunte – Deputy Director, Mr. Derek Lowe -
 Insurance staff who assisted with this review.
May 30th, 2017 3 | NATIONAL INSURANCE & SOCIAL SECURITY 15TH ACTUARIAL REVIEW (2012 to 2014) Executive Summary This actuarial review analyses the experiences between 2012 and 2014 and presents prospects for the National Insurance, Unemployment and Severance Funds.

Experience between January 2015 and September 2016 is also factored into all analyses and recommendations.
Periodic actuarial reviews of the three Funds provide a comprehensive assessment of the current and projected state of Barbados’ social security system.
They also provide policy recommendations for changes designed to and future periods.
Experience During the Review Period rose, the estimated number of workers in 2014 fell to levels not experienced since 1999.
The Government of Following is a summary of key experience of the three Funds under review: • The number of NIS contributors in 2014 declined sharply to its lowest level since 1998.
Barbados debt remained relatively high.
since 1997.
• As at December 2014, total NIF reserves were $4.7 billion, 8.0 times expenditure in 2014.

Outstanding contributions totalled $224 million.

• After falling behind on its contributions and rental payments, the Government of Barbados covered some of its arrears by issuing Treasury notes and debentures to the NIF.
• The portion of combined investments held in government and quasi-government securities increased from
payments.
• The Severance Fund continued to generate surpluses in an environment of business closures and worker layoffs.
• Challenges related to the installation of an upgraded insurance administration system continued to plague • The NIS has not issued NIF annual reports since 2009 and has not submitted to the Minister audited National Insurance Fund This report’s assessment of National Insurance policy and design indicators suggests that current contribution
most workers and pensioners.
The legislated annual adjustments of the earnings limit and pensions have been for higher paid workers.
No adjustments were made in 2015 and 2016.
4 | NATIONAL INSURANCE & SOCIAL SECURITY 15TH ACTUARIAL REVIEW (2012 to 2014)
come from the same sources as NIS contributions, such high exposure to government debt raises additional concerns on the effects on the overall economy when government actually meets its debt obligations to the NIS.
The economics of a national pension fund having large holdings of government debt indicate little difference between raising NIS contribution rates and raising taxes to repay government bonds.
Whether government meets its obligations through increasing taxes or defaults on its obligations, forcing the NIS to increase its contribution rate, the burden of meeting future NIS obligations will ultimately be borne by current and future jeopardizes the ability of the NIS to meet its promised pension obligations in the medium and long-terms.
have been performed so that a range of reasonable prospects for the Fund may be assessed.
These projections uncertainty in projecting such an extended period, the timing of certain events and the rates that will apply are presented as ranges.
1.

Total expenditure will exceed contribution income each year.
3.
The Fund will be depleted as early as 2045 under the Pessimistic Scenario or as late as 2074 under the Optimistic Scenario.
These results are based on Barbados Government debt being redeemed as scheduled at full face value.
Should the GOB restructure any debt held by the NIF through reducing the face amount and/or yields on bonds/ excluded from the NIF, depletion of reserves is projected to occur in 2033.
be very well funded if there is sustained economic growth.
NIF-related recommendations made throughout this report are based on the goal of further enhancing These recommendations are: 1.
Increase participation among self-employed persons by implementing a simple and attractive means by
a.
Add skilled and experienced persons in operational, IT and accounting areas so that immediate and being able to produce reliable reports on the Funds’ operations.
5 | NATIONAL INSURANCE & SOCIAL SECURITY 15TH ACTUARIAL REVIEW (2012 to 2014) b.

Make maximum use of the capabilities of the information technology systems so that service levels may be improved.
Unemployment and Severance Funds During the extended period of economic challenges the Unemployment Fund experience was consistent with
fell from 2 times annual expenditure to eight months worth of expenditure.
for 3 years will allow the Fund to meet expenditure through the next few years without any additional rate increase once all contributions are paid in cash.
For the Severance Fund, the limited payment and reimbursement rules do not appear to be in line with prevailing employment practices and behaviour as reserves continued to grow during the review period.
At the to the Unemployment Fund for three years, the Severance Fund is expected to experience surpluses each year.
Following are recommendations for the Unemployment and Severance Funds: (i) Determine whether a contribution rate increase for the Unemployment Fund is required prior to the Unemployment Fund will cease.
(ii) Perform a comprehensive review of the provisions of the Severance Payments Act and determine what amendments are required to create a scheme that better meets the needs of both employers and workers when redundancy either occurs or is being considered.
(iii) Establish written investment policy statements for both the Unemployment and Severance Funds or provide Governance Appropriate governance structures for public entities and the adherence to good governance practices are critical to their success.
With the exception of Jamaica, all other Caribbean national insurance and social security of the several Funds, while operational and all human resource policies and procedures are those that apply to Government.
need for a review of the Department’s organizational structure with a goal of enhancing the quality of services offered by the NIS.
The review should also focus on all governance arrangements that will ensure the effective Independent of any structural changes, the Board is further encouraged to: • prepare a document that contains good governance guidelines specially tailored for the NIS; • provide for other Board sub-committees to include, and possibly be led by, non-Board members, who 6 | NATIONAL INSURANCE & SOCIAL SECURITY 15TH ACTUARIAL REVIEW (2012 to 2014) Chapter 1 : National Insurance Fund Experience Since the 14th Actuarial Review 1.1 Amendments to Act and Regulations Each year National Insurance & Social Security Orders that facilitate the annual, automatic adjustments to the earnings limit, pensions and grants are signed by the Minister with responsibility for National Insurance.
For the earnings limit, annual adjustments represent the change in national wage index for the previous year average change in wage index is used.
The following table shows the recent changes to earnings limits, minimum contributory pension and pension adjustments.

Table 1.1.
Earnings Limit and Pension Adjustments, 2012 to 2014 Change Effective Monthly Earnings Increases To Limit (Ceiling) Earnings Limit January 2012 January 2013 January 2014 Minimum Contributory Pension (per week) Increases To Pensions & Grants Most of the pension reforms enacted in 2006 have been fully phased in with two exceptions: i. the normal pension age increased to 66½ in 2015 and will reach 67 in 2018. ii.
Until 2022, calculations for Old Age Contributory Pensions will use a combination of the “old” and “new” bases.
1.2 Economic Experience The National Insurance Fund (NIF)’s two sources of income, contributions and earnings on investments,
 economic changes.
For example, more people are likely to claim Old Age Contributory Pension prior to normal As shown in the charts in Figure 1.1, economic growth in Barbados has been minimal in all but one year since
suggested that employment levels increased in 2012 and 2013, the lowest level of employment in 10
 years was recorded in 2014.
therefore, declined during the review period.
7 | NATIONAL INSURANCE & SOCIAL SECURITY 15TH ACTUARIAL REVIEW (2012 to 2014) Figure 1.1.
Key Economic Indicators, 2004 to 2014 Real GDP Growth 8% 6% 4% 2% 0% -2% -4% -6% 2004 2006 2008 2010 2012 2014 # Employed Persons 135,000 130,000 125,000 120,000 10% 8% 6% 4% 2% 0% 6% 5% 4% 3% 2% 1% 0% 2004 2006 2008 2010 2012 2014 Wage Growth 2004 2006 2008 2010 2012 2014 2004 2006 2008 2010 2012 2014 1.3 National Insurance Fund Experience In line with recent economic patterns, the number of insured persons making contributions decreased issues may account for the reduction in 2012 and above average increases in 2013 and 2014.
The key result (number of pensioners per 100 insured persons) from 30 to 38 between 2011 and 2014.
Figure 1.2.
Contributors and Pensioners, 2004 to 2014 # Insureds # Pensioners # Pensioners per 100 Insureds
earnings is often referred to as the replacement ratio.
This ratio increased between 2006 and 2011 but since then has decreased.

The effect of pension reforms on new pensions has contributed to slowing the growth of average pension amounts and replacement ratios.

8 | NATIONAL INSURANCE & SOCIAL SECURITY 15TH ACTUARIAL REVIEW (2012 to 2014) Figure 1.3.

Average Insurance Wages and Pensions in Payment, 2004 to 2014 Avg Weekly Insurable Wage Average Weekly Pension Avg.
Pension as % of Ins Wage $650 $600 $550 $500 $450 $400 $350 $300 $250 $200 $150 $100 60% 50% 40% 30% 20% 2004 2006 2008 2010 2012 2014 2004 2006 2008 2010 2012 2014 2004 2006 2008 2010 2012 2014 The following table provides summary income and expenditure amounts for 2012 to 2014.
A more detailed Table 1.2.
Summary of NIF Finances, 2012 – 2014 (millions of $’s) 2012 2013 2014 Income ( Contributions (accrual basis) Investment Other Total ) 570.3 273.8 5.0 849.1 p Expenditure Administrative Total Excess of Income over Expenditure Change in Unrealised Investment Gains & Prior Year Adjustments Reserves (end of year) Note: Due to rounding, some totals may not correspond with the sum.
p y y ) )))) ( ( jj 33.2 548.4 300.7 ) ( ) ( (18.1) 4,222.5 598.0 276.6 5.1 879.8 29.2 593.4 286.4 532.1 266.2 5.6 803.9 27.3 587.9 216.0 16.3 4,525.1 ( ( (31.7) ) ) 4,709.5 Investment income was relatively stable.

Key highlights of income and expenditure are: • Contribution income fell in 2014 due to a reduction in the workforce.
• • Administrative costs decreased during the period.
• The excess of income over expenditure fell sharply in 2014 due to a decrease in revenue and unrealized losses.

• Total reserves grew from a revised $3.9 billion at the end of 2011 to $4.7 billion at the end of 2014.
At the end of 2014, the NIF had $565.7 million of un-invested assets comprising: • Cash and bank balances: $121.7 million • Contributions receivable: $223.7 million $220.3 million • Accounts receivable: 9 | NATIONAL INSURANCE & SOCIAL SECURITY 15TH ACTUARIAL REVIEW (2012 to 2014) 1.4 Experience Compared with Projections of 14th Actuarial Review In the 14th Actuarial Review, projections were prepared under three scenarios – Best Estimate, Optimistic and Pessimistic.
Shown below is a comparison of actual cumulative experience over the 3-year period with the projections of the Best Estimate Scenario.

Table 1.3.
Projections from 14th Actuarial Review Compared with Actual Experience 2012-2014 Projected (millions of $’s) 2012-2014 Actual (millions of $’s)
% Difference
Actual income and expenditure were higher for all categories over the three year review period.
For contribution statements accounted for a large portion of the differences.
1.5 Investments At the end of 2014, National Insurance Fund investments stood at $4.16 billion, up from $3.70 billion at the end
The following table provides a summary of the investment mix of the National Insurance Fund at year-ends 2011 and 2014.
Table 1.4.

Summary of Investments, Year-end 2014 & 2011 (millions of $’s) Investment Category 2014 2011 $’s % $’s y q 18.8 Treasury Bills & Notes Government Bonds 47.8 2.2 Fixed Deposits p 6.6 Equities 12.3 Other Bonds & Loans Real Estate 6.8 5.5 Foreign Investments g Total 100 Note: Due to rounding, some totals may not correspond with the sum.
782.9 , 1,988.3 90.6 275.8 510.8 283.3 228.0 4,159.6 965.6 , 1,270.6 217.9 364.5 475.2 248.8 158.8 3,701.4 % 26.1 34.3 5.9 9.8 12.8 6.7 4.3 100 10 | NATIONAL INSURANCE & SOCIAL SECURITY 15TH ACTUARIAL REVIEW (2012 to 2014) Notable changes in asset mix between 2011 and 2014 are: reduction in the percentage held in T-Bills and Notes.
c) Reduction in the value of local and regional equities.
d) Increase in the value of foreign investments due to unrealized gains as no new funds have been placed overseas since 2009 due to Central Bank restrictions.
across different locations and (iv) by issuer of the underlying securities.
The following charts illustrate the
Figure 1.4.
Investments, December 2014 Investments By Major Asset Class Other Bonds & Loans 12.3% Real Estate 6.8% - 5.5% - Local & Regional 6.6% Fixed Deposits 2.2% Treasury Bills & Notes 18.8% Government Bonds 47.8% Barbados 95% Regional 1% 4% Investments By Issuer - Local ($3,932 million) Investments By Issuer - Overseas ($228 million) Quasi- Government 8.4% Other 21.1% Government 70.5% Caricom Gov't 20.6% 79.4% The Investment Policy Statement which guides National Insurance Fund investments was revised in May 2013 and again in May 2016.
Among other things, the Policy sets out investment objectives and guidelines for the Fund and a strategic asset allocation.

The following table shows the actual asset mix at December 31, 2014 compared with the target allocations found in the Investment Policy.

11 | NATIONAL INSURANCE & SOCIAL SECURITY 15TH ACTUARIAL REVIEW (2012 to 2014) Table 1.5.
Asset Mix Compared To IPS Strategic Allocation, Dec .2014 Investment Class y Money Market Fixed Income Equities Real Estate Alternatives q `Actual Target Variance
equities is
equities is shown below.
Table 1.6.
December 2014 Asset Mix Compared with Investment Policy Guidelines Fixed Income Equities
Actual Target Variance
As shown above, the portion held in debentures is almost twice as high as the established target while international equities are less than half of the target.
Immediate steps should be taken to reduce the portion of Fund assets held in securities issued by the GOB.

1.6 Subsequent Events This report is being prepared in December 2016, almost two years after the review period ended.
Listed recommendations presented in this report.
• The earnings limit and pensions in payment were not adjusted in January 2015 and January 2016.

Adjustments set to take effect January 2017 have been announced.
• As of September 2016: • Total reserves stood at $5.24 billion; • Contributions and accounts receivable totalled $839 million.
12 | NATIONAL INSURANCE & SOCIAL SECURITY 15TH ACTUARIAL REVIEW (2012 to 2014) Chapter 2 : Assessment of Performance & System Design
and examines how well key policy objectives are being met.
2.1 Historical Performance, 1967 – 2014 Figure 2.1.
National Insurance Financial Experience Reserve - 50 40 30 20 10 0 Expenditure Rate 1967 1972 1977 1982 1987 1992 1997 2002 2007 2012 1967 1972 1977 1982 1987 1992 1997 2002 2007 2012 Yield on Reserves Admin.

Exp.

as % of Cont.
Inc.
Following a series of contribution rate adjustments starting in the mid 1990’s, the relative size of reserves increased.
Due to high yields on GOB bonds, the Fund continued to realise a relatively high rate of return which has contributed to the relative size of reserves remaining at around eight times annual expenditure.

The Fund continues to experience low administrative costs.
13 | NATIONAL INSURANCE & SOCIAL SECURITY 15TH ACTUARIAL REVIEW (2012 to 2014) Following are values for several key indicators as of the dates of the 13th, 14th, and 15th Actuarial Reviews along with a brief analysis of the changes that have occurred.

Table 2.1.
National Insurance Performance Indicators 2008 2011 2014 Comments 4.
Reserve-Expenditure Ratio 7.3 8.0 on reserves over last two review periods faster than GDP Unchanged in most recent review period environment 8.0
8.0 7.
Administrative Expenses (3-yr average) as:
of Avg.
Insurable Wage to combination of fewer contributors and more pensioners large changes in one or more of these rates.
Note: Several rates for 2011 are different from those shown in 14th
2.2 Meeting Policy Objectives The National Insurance system is mandatory for all employed and self-employed persons and is expected to be
certain rules are enforced, and how well the system is managed, also impact how well policy objectives are met.
14 | NATIONAL INSURANCE & SOCIAL SECURITY 15TH ACTUARIAL REVIEW (2012 to 2014) To determine how well these objectives are now being met, and how likely they are to be met in the future, an
categories that are assessed are: • Coverage, which looks at how well workers of all sectors are covered for income security in old age; • Adequacy, which relates to the ability of pensions to provide a decent standard of living; • Financial sustainability, which ultimately relates to the affordability of the system to future contributors; and
 quality service.
2.2.1 Coverage With NIS participation mandatory for all employed and self-employed persons, coverage concerns relate to actual participation rates by formal and informal sector workers and the proportion of elderly residents contribution to the NIS each year.
Most of those not contributing are likely to be self-employed.
year.
In total, the NIS provides coverage for a reasonably large portion of the working population.
2.2.2 Adequacy • Current adequacy: Are pensions adequate today?
• Future adequacy: Under current provisions, will the pension be adequate in the future?
Current Adequacy average insurable wage.
This is an acceptable minimum pension replacement rate.
Annual adjustments to the
Old Age pension for those who do not qualify for the NIS Contributory Old Age pension or other public or private pensions provides further income protection for seniors who qualify.
15 | NATIONAL INSURANCE & SOCIAL SECURITY 15TH ACTUARIAL REVIEW (2012 to 2014) Future Adequacy A worker who has steady earnings below the earnings limit and contributes to the NIS for a full career pre-retirement earnings.
By ILO and other international standards this is quite high and thus meets reasonable not have steady wages and do not consistently work and contribute for 35 or 40 years.
time of award and throughout the pension payout period as the pension maintains its initial purchasing power.
Since no increases were granted in 2015 and 2016, irregular earnings ceiling and pension increases could affect who have employment earnings well in excess of the earnings limit and those who fail to contribute for at least 10 years.
When compared with targeted replacement rates for mandatory social security pensions in OECD countries, the Barbados NIS provides relatively high replacement rates.
The NIS pension is not intended to provide all of
income.
2.2.3 Financial Sustainability Assessing the sustainability of a national pension system is complicated.

Given the perpetual nature of these systems, the rules that apply to private pensions systems are not appropriate.
Therefore, whether current should not be used to determine long-term sustainability.
Instead, assessing sustainability involves looking at the cost of the system now and in the future, and considering whether or not employers and workers in the security discussions is whether the pension system is able to meet the needs of current generations without compromising the needs to future generations.
By design, the NIF is partially funded and the current contribution rate and accumulated reserves are expected to be adequate to meet all obligations for another 30 to 40 years.
As seen in the last eight years, economic
then eventually investments will have to be liquidated.
This is a natural progression for partially funded national pension systems.
There are several risks associated with holding reserves of $5 billion (in 2016) that can impact long-term inability of Government to return cash to the NIS when debentures mature and the NIS needs cash to meet its obligations.
Finding ways to effectively mitigate these risks will be critical given the state of both the economy 16 | NATIONAL INSURANCE & SOCIAL SECURITY 15TH ACTUARIAL REVIEW (2012 to 2014) It is not possible to determine today the highest contribution rate that workers and employers will be able to
administrative costs.
However, the level of service and availability of reliable information remain challenges.
Over the past few years the NIS has been faced with major administration system issues which negatively Unlike most other social security institutions in the region that are operated as quasi-public sector entities
servants and the Board manages the Fund.
While this approach has its advantages, experience suggests that NIS operations could be more effective if greater autonomy was given to the Board on human resource matters Recommendations relating to each of these national pension policy objectives are presented in Chapter 5.
17 | NATIONAL INSURANCE & SOCIAL SECURITY 15TH ACTUARIAL REVIEW (2012 to 2014) Chapter 3 : Best-Estimate Projections Many demographic and economic factors, such as changes in the size and age structure of the population, Therefore, to best assess the Fund’s long-term costs and sustainability, projections of Barbados’ total population and the economy are required.
For this review 60-year projections have been performed.

In developing all of the assumptions used for the projections, historical trends and reasonable future expectations, as well as the inter-relationships between the various assumptions, have been taken into account.
as “Best Estimate.”
as “Best Estimate.” using two additional sets of assumptions.
These alternative projection sets, which encompass assumptions that are generally more optimistic and more pessimistic than best-estimate assumptions, are labelled “Optimistic” Chapter 4.
3.1 Population Projections range and life expectancy continues to increase.
3.1.1 Projection Assumptions Projections of Barbados’ population begin with the results of the 2010 census and in each projection year thereafter, fertility, mortality and migration assumptions are applied.

Fertility rates are used to estimate the number of births each year while mortality rates determine how many, and at what ages, people are expected to die.
Net migration represents the difference between the number of persons who permanently enter and leave Barbados, and is the most volatile of the three factors.

The 2010 population census placed Barbados’ population at 277,821.

The total fertility rate (TFR) represents the average number of live births per female of childbearing age in a particular year.

If there is no migration, a TFR of 2.1 is required for each generation to replace itself.
Barbados TFR was estimated at between 1.65 and 1.7 over the period 2006 to 2014.

For these projections it is assumed that TFR’s in Barbados will remain below replacement level at 1.65.

Using United Nations mortality tables, current population estimates and the number of deaths in the past few years suggest life expectancy at birth in 2015 of around 76.4 for males and 79.6 for females.

Improvements in life expectancy are assumed to occur in accordance with UN estimates.
Using the 2000 and 2010 census counts, and reported births and deaths between censuses, implied net out- migration between 2000 and 2010 is estimated at around 400 per annum.
18 | NATIONAL INSURANCE & SOCIAL SECURITY 15TH ACTUARIAL REVIEW (2012 to 2014) The economic assumptions used for this report assume stable and positive economic growth and labour productivity in all years.

Although simplistic, they approximate usual economic cycles and volatility that encompass periods of expansion and recession.
They also account for projected changes in the population and labour force that will provide the capacity for additional output through more workers and increased productivity (real wages).

The following table indicates the principal demographic and economic best-estimate assumptions for this and the previous Review.

Further details may be found in Appendix B.

Table 3.1.
Table 3.1.

Principal Demographic and Economic Assumptions 15th Actuarial Review Total Fertility Rate y Mortality Improvements^ p Net In-Migration Per Annum (p.a.)

y 14th Actuarial Review 1.65 Slow -300 p.a.

in 2010 increasing to -100 p.a.

in 2015 increasing to 300 p.a.

in 2030, constant thereafter 1.65 Slow -300 p.a.

in 2010 increasing to 0 p.a.

in 2020 increasing to 300 p.a.
in 2040, constant thereafter Real GDP Growth Rates Short-term IMF estimate* Real Increase in Wages g Note: ^ UN mortality improvement rates *
* 3.1.2 Projection Results From the 2010 Census population of 277, 821 and with the above assumptions, Barbados’ population is projected to increase only slightly over the next 20 years and then gradually decrease.
Figure 3.1.
Projected Barbados Population (Best-Estimate scenario) 300,000 250,000 200,000 150,000 100,000 50,000 - Age 67+ Age 16-66 Age 0-15 2010 2020 2030 2040 2050 2060 2070 2080 19 | NATIONAL INSURANCE & SOCIAL SECURITY 15TH ACTUARIAL REVIEW (2012 to 2014) It should be noted that the projections presented in this report have been prepared for the sole purpose development scenarios.
For the NIF, while projected future population size is important, the age distribution is more critical, as pensions to the elderly represent the bulk of expenditure and contributions will be paid by those in the working-age groups.

As shown above, while the number of children and working-age persons is projected to decrease over time, the elderly population is expected to increase.

These projections show a slightly smaller projected population than presented in the 14th Actuarial Review.
3.2 National Insurance Fund Projections
provisions that were in place on January 1, 2015, with provisions made for previous reforms that are being phased in gradually.
3.2.1 Assumptions Key National Insurance assumptions are shown below.

Table 3.2.

National Insurance Best Estimate Assumptions 15th Review 14th Review Avg.
Contribution Rate Insurable Wage Ceiling increases Annually by the change in the Annually by the change in the wage index Pension Increases g Long-term Yield on Reserves Other Income Administrative Expenses g wage index starting 2017 Annually by lower of 3-year average change in prices and wages
(Additional $40 million in 2015-2017) Annually by lower of 3-year average change in prices and wages
 With the automatic annual earnings limit and pension adjustments, it is being assumed that the prevailing level of coverage and income security made possible by the earnings ceiling and the minimum pension will be generally maintained throughout the projection period.
20 | NATIONAL INSURANCE & SOCIAL SECURITY 15TH ACTUARIAL REVIEW (2012 to 2014) 3.2.2 Projection Results The charts in Figure 3.2 highlight key projection results of the Best Estimate scenario assuming that the legislated.
For these projections it collected.
This reduces the initial reserves from $4.7 billion to $4.6 billion.

Figure 3.2.
Projection Results – Best Estimate Scenario Reserves Pay-As-You-Go & Contribution Rate 8,000 6,000 4,000 2,000 - -2,000 10 8 6 4 2 0 -2 35% 30% 25% 20% 15% 10% 5% 0% Pay-As-You-Go Rate Rate 2014 2024 2034 2044 2054 2064 2074 Reserve- Contributors & Pensioners 2014 2024 2034 2044 2054 2064 2074 140,000 120,000 100,000 80,000 60,000 40,000 20,000 Contributors Pensioners 2014 2024 2034 2044 2054 2064 2074 0 2014 2024 2034 2044 2054 2064 2074 The key results of these projections are summarised as follows: 1.
Expenditure will exceed contribution income in each year.
3.
Reserves are projected to be exhausted in 2053.

4.
In 2053 when reserves are exhausted, annual expenditure relative to total insurable wages (pay-as-you-go rate) will 6.
The general average premium, or the average level contribution rate required over the next 60 years to fully cover 7.
The number of contributors for each pension in payment is expected to fall from 3.0 in 2014 to 1.8 in 2074.

One key funding objective of the pension reforms made in 2002 was a target reserve-expenditure ratio of 5.0 in 2030.

For this Best Estimate scenario, this target is met as the projected reserve-expenditure ratio in 2030 is 6.9.
to 3.5.
21 | NATIONAL INSURANCE & SOCIAL SECURITY 15TH ACTUARIAL REVIEW (2012 to 2014) Table 3.3.
Projected Income, Expenditure and Reserves -Best Estimate (millions of $’s) Income Expenditure Reserves expenditure 5.9
857.2 840.6 854.9 863.5 875.9 886.0 974.2 5.9 7.1 1,149.2 8.6 1,213.3 2054 1,195.9 (37.2) (639.3) 2064 1,496.5 2074 1,860.3 (1,823.4) (52.9) (367.6) 4,222 4,525 4,709 4,973 5,059 5,231 5,449 5,662 5,862 6,574 7,112 4,931 7.7
 7.6 8.0 8.0 7.8 7.7 8.4 8.5 8.6 8.1 5.9 3.1 67.2 2,024.3 (854.7) 84.1 2,578.1 (1,707.4) 104.5 3,343.5 (3,289.9) (1,195) (13,968) (39,026) (0.6) (5.4) (11.7) Notes: Negative reserves indicate the indebtedness of the Fund and negative investment income is the current cost of servicing that debt.
Investment Income for 2012 to 2014 includes prior year adjustments and changes in unrealised investment gains.
Year Old Age Cont.
Invalidity Survivors Non-Cont.
Short term Employ- 2012 2013 2014 2015 2016 2017 2018 2019 2020 2024 2034 2044
2054 2064
2064 2074 Old Age
Injury
Insurable Wages GDP
22 | NATIONAL INSURANCE & SOCIAL SECURITY 15TH ACTUARIAL REVIEW (2012 to 2014) Table 3.5.
Projected Contributors and Pensioners at Year-end - Best Estimate Year Contributors Old Age Cont.
Invalidity Survivors Old Age Total # of Non-Cont Disablement Pensioners Death & Ratio of Contributors to Pensioners - - - 1.8
3.0 3.0 3.1 3.1 3.0 3.0 2.8 2.3 2.0 1.9 1.9 1.8 For national pension systems that are partially funded and designed to be perpetual, costs are usually presented in terms of the pay-as-you-go-rates, which represent annual expenditure as a percentage of covered wages.
For
3.2.3 General Average Premium The general average premium is the average level contribution rate required over the next 60 years to fully cover total expenditure during that period.
This rate may be looked at as the average long-term cost of the 3.2.4 Actuarial Balance
a) the sum of the beginning reserves and the present value of future contributions (money available to meet expenditure), and b) the present value of future expenditure; divided by the present value of future insurable wages.
This formula produces a rate that indicates the adequacy 23
23 | NATIONAL INSURANCE & SOCIAL SECURITY 15TH ACTUARIAL REVIEW (2012 to 2014) Table 3.6.
Actuarial Balance 2014 – 2074 ($’s are in millions) Plus Minus Equal 2014 Year-end Reserves^ PV of Future Contributions PV of Future Expenditure PV of Surplus/(Shortfall) 4,598 15,063 21,691 (2,030) Note: ^ Consistent with previous discussions, the negative actuarial balance indicates that together with
 reserves, the
for reserves to last up to 2074.
3.3 Comparison with Results of the 14th Actuarial Review The projection results presented earlier in this chapter differ from those of the 14th Actuarial Review as shown in the following table: Table 3.7.
Summary Results – Pre & Post Pension Reform 15th Actuarial Review 14th Actuarial Review p Expenditure Exceeds Income Reserves Depleted 2032 2053 2035 2056 The results of this 15th Actuarial Review show a less favourable outlook than presented in the 14th Review.
The main reasons for this are tempered economic outlook with smaller populations and lower economic growth which results in fewer NIS contributors than projected previously.
3.4 Sensitivity Analysis – NIS Factors period, future experience will certainly differ from that projected under best estimate assumptions.
To illustrate a reasonable range for the Fund’s outlook, projections using two different sets of population, economic and National Insurance assumptions are presented in the following chapter.

However, certain National Insurance factors such as yield on reserves will also impact the Fund’s outlook.

The change in long-term costs for differences in investment returns is shown in the following table.

24 | NATIONAL INSURANCE & SOCIAL SECURITY 15TH ACTUARIAL REVIEW (2012 to 2014) Table 3.8.
Sensitivity Tests – National Insurance Factors Assumption Differs From Reserve Ratio Best Estimate in 2030 General Average Premium Reserves Depleted As shown above, the outlook for the Fund is better/worse if yields on reserves are greater/ lower than assumed.
3.5 Sensitivity Analysis – Government Factors Recent IMF reports refer to the level of central government debt using two metrics – one excluding and the other perspective, excluding securities held by the NIF from public debt levels translates to removing $2.8 billion placing reserves at approximately $1.9 billion instead of $4.7 billion.
When government debt is viewed with NIS holdings excluded, the implicit assumption is that these assets are not “real” and that government raising taxes to repay the NIS is akin to raising the contribution rate on NIS contributors.

This is because government tax revenue and NIS contributions come largely from the same sources - businesses, workers and consumers.

While the above discussion is primarily academic, the Fund faces the risk of GOB restructuring some or all of the debt that NIF holds.
A restructuring of Government debt could include the face amount being reduced and/or yields drastically reduced.
Both scenarios have occurred in the Caribbean in recent years as governments with high debt to GDP ratios Table 3.9.
Implications of GOB Debt Restructuring on NIF Assumption Best Estimate NIF Assets Exclude GOB debt.
($1.9 billion as at Dec. 2014) and average yield on all reserves average yield on all reserves yield on remainder reduced Reserve Ratio in 2030 Expenditure Exceeds Income Reserves Depleted 6.9 0.7 2032 Immediately 2053 2033 25 | NATIONAL INSURANCE & SOCIAL SECURITY 15TH ACTUARIAL REVIEW (2012 to 2014) Chapter 4 : Alternative Scenarios Best Estimate projections up to 2074 presented in the previous chapter provide estimates of future National
forecasting such a long period, two alternative scenarios that highlight the sensitivity of the results to differences in assumptions regarding future outlook have been performed.
These alternative projection sets encompass assumptions that are generally more optimistic and more pessimistic than those of the Best Estimate projections.
compliance rates and operating costs, the basis for the alternative scenarios focus more on economic growth and employment.
The Optimistic scenario represents one with positive economic growth starting in 2016 with employment levels returning close to 2008 levels over a 10-year period.

The Pessimistic scenario represents a smaller population where employment levels gradually decline each year.

Following is a summary of the main assumptions for the three projection scenarios.

The values for all other assumptions are similar across scenarios.

Table 4.1.
Table 4.1.

Principal Demographic, Economic and National Insurance Assumptions Ultimate Total Fertility Rate Mortality Improvements^ Net (In) Migration Per Annum (p.a.)

Pessimistic 1.7 Medium Best Estimate 1.65 Slow Optimistic 1.6 Very Slow -450 p.a.

in 2010 increasing to -150 p.a.

in 2015 increasing to 150 p.a.

in 2030, then to 75 p.a.

after 2040 -300 p.a.

in 2010 increasing to - 100 p.a.

in 2015 increasing to 300 p.a.

in 2030, constant thereafter -150 p.a.

in 2010 increasing to -50 p.a.


in 2015 increasing to 450 in 2030 then to 600 p.a.
after 2040
Notes: ^UN mortality improvement rates 26 | NATIONAL INSURANCE & SOCIAL SECURITY 15TH ACTUARIAL REVIEW (2012 to 2014)
to the size and age distribution of the general population and National Insurance performance indicators such as contribution collection rates and yield on investments.
Figure 4.1.

Projection Results – All Scenarios Projected Reserves 300,000 280,000 260,000 240,000 220,000 200,000 2010 2020 2030 2040 2050 2060 2070 2080 10 8 6 4 2 0 2014 -2 2024 2034 2044 2054 2064 2074 Projected Reserve- Projected Pay- as-you-go Rates 10 8 6 4 2 0 2014 -2 40% 35% 30% 25% 20% 15% 10% 2024 2034 2044 2054 2064 2074 2014 2024 2034 2044 2054 2064 2074 Table 4.2.
Summary Results – All Scenarios Expenditure First Exceeds Total Income Reserves Depleted Reserve Expenditure Ratio in 2030 # of Contributors per pensioner – 2074 Pessimistic Best Optimistic 2028 2045 5.8
1.5 Estimate 2032 2053 6.9 1.8 2045 2074 8.0
2.0 27 | NATIONAL INSURANCE & SOCIAL SECURITY 15TH ACTUARIAL REVIEW (2012 to 2014) Chapter 5 : Balancing Adequacy and Sustainability this report.
These challenges are categorized in Table 5.1 and a summary of the recommendations is shown.

Discussion of each issue follows.

Table 5.1.
POLICY OBJECTIVE CHALLENGES AND OPTIONS FOR REFORM Coverage Financial Sustainability Current Challenges • Most self-employed persons do not contribute to the NIS Recommended Action self-employed contributions using • No Old Age Contributory pension prior to normal pension age if minimum pension new technologies • Allow reduced Early Age pensions • Investments heavily concentrated within Barbados and in Government debt • Diversify investments outside of public sector and outside of Barbados • Funding policy/contribution rate • Revise current funding policy increases • Lengthy service times, incomplete
 statements and annual reports • Make greater use of available technology or upgrade where necessary • Ensure adequate staff in key positions Governance • No single, comprehensive good governance guidelines manual • NIS administered by a government • Prepare good governance policies & guidelines for the NIS in line with ISSA recommendations department • Review options for more effective administration 5.1 COVERAGE 5.1.1 Self-employed Persons Contributions
 rate is not uncommon in the Caribbean.
Many individuals do not register and/or contribute simply because they their earnings more effectively to provide for themselves.
There are some, however, who delay and eventually do not pay because of the paperwork involved and limited payment options available.

While targeted campaigns on educating self-employed persons will likely help, new ways for self-employed persons to pay contributions should be put in place.
Approaches that have been suggested before include: 28 | NATIONAL INSURANCE & SOCIAL SECURITY 15TH ACTUARIAL REVIEW (2012 to 2014) • automatic bank transfers of a set contribution amount each without the need to complete a contribution form; • allow those with irregular income to make lump sum payments at any time - simply “put money on their account” as their means allow, without the need to complete a form.
This latter approach will require revisions to current procedures as the contribution payable now is based on the amount earned and the number of weeks worked.

Mobile technology now provides new opportunities for conducting businesses.

Commercial banks have been extremely successful at using such new platforms allowing customers to conduct most of their banking needs without having to visit a branch.
The NIS should use existing systems and consider new technologies that can
informal sector workers contributing to the NIS should be continued.
th Actuarial Review.
These are: a) Denial of claims for Old Age Contributory pension where the applicant is less than normal pension age and the calculated reduced pension amount is less than the minimum pension.

This provision was added when the ability to receive reduced pensions from age 60 was introduced.

This restriction has disadvantaged many claimants.

b) The payment of Old Age Contributory or Invalidity pension together with Survivors pension.

Currently, only the higher of the two is paid.


No amendments were made to either since the report of the 14th Actuarial Review was presented and it is unclear if the recommendations were rejected.

Therefore, these issues should be reviewed.


For the issue of awarding Old Age Contributory pensions prior to normal pension age two possible alternatives and their implications were presented: a) Award early pensions at a rate lower than the current • Set minimum pension rates for each age under normal pension age.
These minimums could be either b) Award the minimum pension • This would lead to increased cost over current rules as the full effect of the reduction for early payment would not be applied to lower income pensioners.
For the issue of paying both Old Age Contributory or Invalidity pensions together with Survivors pension, two reasonable options provided were: Option 1: Where both spouses are pensioners, the survivor would receive the higher of two pensions, but not
29 | NATIONAL INSURANCE & SOCIAL SECURITY 15TH ACTUARIAL REVIEW (2012 to 2014) Option 2:
If adopted, persons who have already claimed
 Survivors’ pensions and who are now receiving only the greater of forward only.
The rules that apply for Old Age Contributory pension should also apply to Invalidity pension.

It is recommended that these two issues be reviewed.
5.3 Financial Sustainability
NIF costs are often expressed in terms of the pay-as-you-go rate.
Therefore, if future pay-as-you-go rates can clearly illustrated by breaking down the pension pay-as-you-go rate formula into components.
Figure 5.1.
Components of the Age Pension Pay-As-You-Go Rate Insurable Wages (pay-as-you-go rate) = = = Total Insurable Wages # Pensioners x Avg.
Pension # Contributors x Avg.

Ins.

Wage # Pensioners Avg.

Pension x # Contributors Demographic Ratio Replacement Ratio Avg.

Ins.
Wage To reduce ultimate pension pay-as-you-go rates, one or both of the two ratios (demographic and replacement) would need to be lower than under the Best Estimate scenario.
The following table summarises the means by which each ratio could be reduced over time.

30 | NATIONAL INSURANCE & SOCIAL SECURITY 15TH ACTUARIAL REVIEW (2012 to 2014) Table 5.2.

Options For Reducing Long-term Pension Costs Lower Demographic Ratio Lower Replacement Ratio 1.

Economic growth 2.

Award OACP later 3.

Award OACP only if retired 4.

Strengthen requirements to qualify for OACP 5.


Reduce average new OACP amount (slower pension accruals, longer period for average wages, career average formula) 6.
No pension increases Many measures aimed at reducing both demographic and replacement ratios were addressed during the
5.3.1 Investments
5.3.1 Investments
Notes and Debentures on or before their maturity dates is growing.
While investment managers and some policy makers may focus primarily on the Fund’s overall rate of return, the rate of return in the short-term The NIF should therefore seek to reduce its exposure to Barbados Government and public sector securities
 participating in new debt issues and treat all loan/investment
 requests from Government and statutory bodies with the same amount of scrutiny and due diligence that it would non-traditional investments.
Where proposals The Investment Policy Statement and Guidelines states:
objectives of the Fund are achieved.
They must ensure that all investment decisions are made in the best Tables 1.7 and 1.8 showed that the current mix of investments is not fully in line with the target asset allocation set out in the Funds’ Investment Policy.
Investment classes that were furthest away from desired targets were government securities (high) and international equities (low).

Immediate steps should be taken to rebalance the investment portfolio.

To ensure that the asset mix remains consistent with current and future needs of the Fund, it is further recommended that the Investment Policy Statement be reviewed periodically as prevailing investment and economic conditions change.
31 | NATIONAL INSURANCE & SOCIAL SECURITY 15TH ACTUARIAL REVIEW (2012 to 2014) 5.3.2 Contribution Rate Increases Even though total expenditure currently exceeds contribution income, no increase in contribution rate is recommended at this time.

One of the stated objectives of pension reforms made in 2002 was a target reserve- expenditure ratio of 5.0 in 2030.
Other reasons for not recommending a rate increase at this time are: suitable investments.
While the current funding objective sets a target reserve-expenditure ratio for 2030, it does not speak to what should happen if projected reserves fall short of this target.
Further, it would be better if the target year were Fund matures, pay-as-you-go rates are likely to stabilise and a funded ratio of less than 5 will be acceptable.
It is 1.
Reserves of 5 times annual expenditure in 2030 years, and reserves of at least 3 times annual expenditure 30 years from the review date.

2.
Should projections in two successive actuarial reviews suggest that these targets will not be met, a combination projected balance.
Based on the projections presented in Chapters 3 and 4, the goal of having reserves of 5 times annual expenditure in 2030 is met under all scenarios.

However, a ratio of 3 times annual expenditure in 2044 is not met in the Pessimistic scenario and only barely met in Best Estimate scenario.
much it costs to perform these functions.
As shown in Section 2.2, administrative costs remain low (between prevail.
The concerns relate primarily to the time that it takes to award short-term claims and the time it takes to award pensions.
major concern.
These challenges may be both system-related and due to the lack of adequate human resources devoted to various tasks.

As a result, the publishing of annual reports and the provision of data required for this report have been delayed extensively.
32 | NATIONAL INSURANCE & SOCIAL SECURITY 15TH ACTUARIAL REVIEW (2012 to 2014) capabilities of the
capabilities of the administration/IT system.
exceptional customer service is consistently provided, and
provided, and
statutory obligations.
(See Chapter 8) 33 | NATIONAL INSURANCE & SOCIAL SECURITY 15TH ACTUARIAL REVIEW (2012 to 2014) Chapter 6 : Unemployment Fund
Unemployment Fund.
6.1 Unemployment Fund Experience The following charts show the national unemployment rate from 2000 to 2014 and the total number of
 the recession in Barbados, unemployment rates and the number of claims awarded began trending upwards in 2008.
Figure 6.1.

Barbados Unemployment Rate & # Of Unemployed Persons Unemployment Rate # Of Unemployed Persons Source: Barbados Statistical Service, Labour Force Surveys 34 | NATIONAL INSURANCE & SOCIAL SECURITY 15TH ACTUARIAL REVIEW (2012 to 2014) Figure 6.2.
Unemployment Fund Experience, 2000 to 2014 The following charts illustrate Unemployment Fund experience from 2000 to 2014.
Expenditure Rate 3.0% 2.5% 2.0% 1.5% 1.0% 0.5% 0.0% Surplus Rate 2000 2002 2004 2006 2008 2010 2012 2014 1.0% 0.5% 0.0% -0.5% -1.0% 2000 2002 2004 2006 2008 2010 2012 2014 -1.5% Total Reserves 140 120 100 80 60 40 20 s n o i l l i M 0 2000 5 4 3 2 1 0 2002 2004 2006 2008 2010 2012 2014 2000 2002 2004 2006 2008 2010 2012 2014 reduction in the size of reserves.
At the end of 2014, reserves represented less than total expenditure in 2014.

35 | NATIONAL INSURANCE & SOCIAL SECURITY 15TH ACTUARIAL REVIEW (2012 to 2014) The following table highlights Fund income and expenditure for 2012 to 2014.

Table 6.1.
Unemployment Fund Experience, 2012 to 2014 ($’s in millions) Contribution Income Investment Income Total Income Administrative Expenses pppp 2012 2013 2014 33.2 4.0 32.1 30.8 1.9 1.2 37.3 34.0 32.1 3.8 3.9 4.3 Total Expenditure p 59.0 47.9 59.8 Excess of Income Over Expenditure (21.8) (13.9) (27.7) Year-end Reserves 82.6 68.7 41.0
Reserve-Expenditure Ratio 1.40 1.43 0.68
recent years.
All contributions due to the Unemployment Fund were not received in cash.

Contributions receivable at the end of 2014 were $26.3 million.

It is uncertain what portion of this amount will be collected.
6.2 Subsequent Experience
• Also in 2015, the GOB injected $3 million into the Unemployment Fund.
This one-time payment from Government plus the transfer of Severance contributions resulted in the Unemployment Fund experiencing a surplus of $17.6 million in 2015.

Contributions receivable increased to $31.4 million at the end of 2015.
• As of May 31, 2016 reserves were $71.8 million, approximately 28 months of monthly Unemployment 6.3 Unemployment Fund Investments As of December 31, 2014 the Unemployment Fund investments totalled $7.6 million, all held in Treasury Notes.
As of September 2016, the Fund had no investments.

As annual surpluses result in the size of the Fund increasing, funds should be shifted into income generating investments.
36 | NATIONAL INSURANCE & SOCIAL SECURITY 15TH ACTUARIAL REVIEW (2012 to 2014) 6.4 Short-term Unemployment Fund Projections expenditure, 10-year projections of the Unemployment Fund under four different scenarios are presented.
Key assumptions for these projections are shown in Table 6.2.
Common assumptions for all scenarios are:
Table 6.2.
Key Assumptions For Unemployment Fund Projections Ins.
Wages 2017+ 2015 2016 Figure 6.3 below illustrates the results of these projections: Figure 6.3.
Projected Unemployment Fund s ' $ f o s n o i l l i M 100 75 50 25 0 -25 Scenario 1 Scenario 3 Scenario 2 Scenario 4 2014 2015 2016 2017 2018 2019 Years 2020 2021 2022 2023 2024 Note: The above Unemployment Fund projections include actual income and expenditure for 2015.
Severance Payments Fund to the Unemployment Fund ceases at the end of 2017.
How quickly reserves decline
The contribution rate should, however, be reviewed in the third quarter of 2017.
37 | NATIONAL INSURANCE & SOCIAL SECURITY 15TH ACTUARIAL REVIEW (2012 to 2014) Chapter 7 : The Severance Fund The National Insurance Board administers the Severance Payments Fund as established under the Severance severance payments in accordance with the Severance Payments Act.
In cases where the employer refuses to, or is unable to make such payment, the Severance Fund makes the payment directly to the employee and the amount paid is recoverable by the National Insurance Board from the employer.
7.1 Severance Fund Experience This rate is payable by private sector employers only.
There were no amendments to Severance payment rules during the review period.

Delays in the processing of Severance payments have affected the timing of actual payments.

Further details of eligibility conditions and rates of payment can be found in Appendix A.

The following charts highlight experience of the Severance Fund from 2000 to 2014.

Figure 7.1.
Severance Fund Experience, 2000 to 2014 Surplus Rate 1.2% 1.0% 0.8% 0.6% 0.4% 0.2% 0.0% 1.0% 0.8% 0.6% 0.4% 0.2% 0.0% Expenditure Rate 2000 2002 2004 2006 2008 2010 2012 2014 2000 2002 2004 2006 2008 2010 2012 2014 Total Reserves Reserve - s n o i l l i M Surplus generated in each year of the three years resulted in the Severance Fund increasing during the review period, but increasing expenditure resulted in the value of reserves relative to annual expenditure decreasing.
38 | NATIONAL INSURANCE & SOCIAL SECURITY 15TH ACTUARIAL REVIEW (2012 to 2014) The following table highlights Fund income and expenditure for 2012 to 2014.

Table 7.1.
Severance Fund Experience, 2012 to 2014 ($’s in millions) Contribution Income Investment Income Total Income Administrative Expenses Total Expenditure Excess of Income Over Expenditure Year-end Reserves^ Reserve-expenditure Ratio 2012 9.7 8.3 18.0 1.0 3.5 14.5 161.1 45.5
2013 2014 9.3 9.7 19.1 1.1 5.0 14.1 175.2 35.2 9.1 10.2 19.3 1.1 6.9 12.4 187.7 27.3
27.3 Note: ^ After the preparation of the 14th Actuarial Review, 2011 reserves were revised from $152.05 million to $146.67.
All contributions due to the Severance Fund were not received in cash.

Contributions receivable at the end of 2014 were $5.6 million.

It is uncertain what portion of this amount will be collected.

7.2 Subsequent Experience Effective January 2015, Severance Fund contributions, which are paid by private sector employers only, have been reallocated to the Unemployment Fund.
In 2015, and during the nine months of 2016, the Fund was still able to 7.3 Fund Investments The following table shows the asset mix of the Severance Fund as at December 31, 2014.
Table 7.2.

Severance Fund Investments, December 2014 Deposits Treasury Bills Treasury Notes Debentures Bonds & Loans Total Amount (millions of $’s) 3.4 21.1 33.2 101.8 5.1 164.6 % of Total 2.1 12.8 20.2 61.8 3.1 100.0 As shown above, the Severance Fund is almost fully invested in Government of Barbados securities of varying maturities.
39 | NATIONAL INSURANCE & SOCIAL SECURITY 15TH ACTUARIAL REVIEW (2012 to 2014) Unlike the National Insurance Fund, the Severance Fund does not have a written Investment Policy that guides how and where its investments are placed.

As the Fund continues to grow without any need for liquid assets, aiming for a higher rate through longer-term securities should be considered.

It is therefore recommended that a written investment policy be created and approved at the earliest opportunity.
7.4 Future Severance Payments
approved by employers after legal advice indicated that a direct transfer of reserves from the Severance Fund to the Unemployment Fund was not possible.
Even without contributions for three years (until December 2017), the Severance Fund is expected to experience annual surpluses as investment income on Fund investments should exceed total expenditure.

The issue of low Severance payments and growing reserves during an extended recessionary period was raised in the previous actuarial report.
The primary concern remains whether the provisions of the Severance Payments Act, which came into force in 1973 and was last amended in 1991, are relevant to the current labour market and economy.

It is once again recommended that a comprehensive review of the objectives and key features of the Severance Payments Act be conducted, to determine whether they are relevant to current employment practices and employer behaviour regarding redundancy, and if not, recommend changes.
40 | NATIONAL INSURANCE & SOCIAL SECURITY 15TH ACTUARIAL REVIEW (2012 to 2014) Chapter 8 : Good Governance 8.1 NIS Governance Structure The current NIS governance structure can be described as follows: • The National Insurance Board (NIB) is a body corporate and reports to Parliament through the Minister responsible for Social Security.

The NIB is governed by a 9-member tripartite board.

Members of the Board are appointed by the Minister.
Generally, control and management of the National Insurance Fund are entrusted to the Board.
• The powers and duties of the Minister and some key functions of the Board and the Director are outlined in the relevant act and regulations.
With the exception of Jamaica, all other Caribbean national insurance and social security funds are fully administered by statutory bodies.
While the Barbados National Insurance Board is a statutory body, its oversight
Orders which are enforced by the Personnel Administration Division.
One advantage to this existing structure is the relatively low administrative costs.
Over the past ten years, the NIS faced major challenges with the installation of a new insurance administration
2004.
Contrary to advice provided in previous actuarial reviews, the portion of funds invested in government In its Good Governance Guidelines, the International Social Security Association (ISSA) states: “A sound governance structure is essential for the effective functioning of the social security institution.
It should ensure an appropriate division of operational and oversight responsibilities as well as the suitability and accountability of the persons involved.”
governance structure for the NIS be conducted.
The Review should also focus on all governance arrangements 8.2 Good Governance Guidelines The report of the 14th Actuarial Review contained an extensive discussion of Good Governance Guidelines for social security institutions prepared by the International Social Security Association (ISSA).
A recommendation was made for the Board to adopt the principles and guidelines included in ISSA’s Good Governance Guidelines, prepare similar guidelines for the NIS, and initiate steps to ensure that good governance practices are commonplace in all aspects of the NIS’s administration and operations.

To date, a document with such good governance guidelines has not been prepared.
41 | NATIONAL INSURANCE & SOCIAL SECURITY 15TH ACTUARIAL REVIEW (2012 to 2014) It is again recommended that a Good Governance Guidelines manual that is localized for the NIS be prepared and should include the following: a) Powers and Duties of the Minister: These are found in various sections of the Act and Regulations but a comprehensive list should be prepared.
b) Functions and Duties of the Board: & internal controls, contracts, communication, remuneration, delegation of authority and corporate governance matters.
c) Terms of Reference for the Chairman: In addition to providing coherent leadership of the NIF and leading Board meetings, the Chairman is expected to ensure the orientation, development and performance evaluation of Board members and lead all relations with stakeholders and the general public.
He/she is also expected to uphold high standards of integrity, set the agenda, style and tone of Board discussions, ensure effective implementation of Board decisions, promote high standards of corporate governance, ensure the continual improvement in quality and calibre of managers, establish a close relationship of trust with the Director and management team, provide support and advice while respecting executive responsibility, and ensure that Ministerial approval is obtained for all Board decisions that require such approval.
d) Board Member Orientation: Board Members are expected to exercise due care and skill in the wherewithal to be effective.
They are expected to ask questions and participate in discussions at meetings, and to contribute relevant insights and experience.

This can only be achieved by Board Members who have the requisite information and up-to-date training.
e) Board Member Code of Conduct: Board Members have an obligation to act in the best interests of the NIS with due regard for the interest of all insured persons and other stakeholders, and in accordance with the Act & Regulations, good governance guidelines, best practices and Social Security’s policies and guidance for Board members should include: preparation, attendance and conduct at meetings, knowledge of Social Security’s business and personal conduct.
f)
inhibit free discussions, result in decisions or actions that are not in the interests of the NIS, and risk the impression that NIB has acted improperly.
The aim of the policy should be to protect both the NIB and the individual(s) involved from any appearance of impropriety.

g) Terms of Reference for the Director: The Director/CEO is accountable and reports to the Board and is responsible for daily operations of the NIS.
He/she is responsible for business strategy and other duties which derive from these responsibilities.
42 | NATIONAL INSURANCE & SOCIAL SECURITY 15TH ACTUARIAL REVIEW (2012 to 2014) h) This policy should provide guidance for all NIS employees, managers and
agreements to be entered into, who may speak to the press and general public and what information may
 the necessary course of business.
Given the extensive nature of NIS information the policy may not cover i) Disclosure of Information: Material information with respect to the Board should be disclosed to the
 statements and statistical information on operational performance, and actuarial review reports.
The policy should also provide for the sharing of information with government departments, international agencies and other relevant authorized external bodies.
43 | NATIONAL INSURANCE & SOCIAL SECURITY 15TH ACTUARIAL REVIEW (2012 to 2014) Statement of Actuarial Opinion It is my opinion that for this report of the 15th Actuarial Review of the National Insurance, Unemployment and Severance Funds: • the assumptions used are, in the aggregate, reasonable and appropriate; and • the methodology employed is appropriate and consistent with sound actuarial principles.
This report has been prepared in accordance with the Caribbean Actuarial Association Actuarial Practice Standard #3 for Social Security Programs.
Morneau Shepell Ltd. Derek Osborne, FSA Partner Marcia Tam-Marks, FSA Partner May 30th, 2017 44 | NATIONAL INSURANCE & SOCIAL SECURITY 15TH ACTUARIAL REVIEW (2012 to 2014) References 13th and 14th Actuarial Review of the National Insurance, Unemployment and Severance Funds, Horizonow Consultants, 2011 Annual Reports and Financial Statements of the National Insurance, Unemployment and Severance Funds Barbados, Selected issues, International Monetary Fund, 2016 Barbados: 2016 Article IV Report, IMF, 2016 National Insurance and Social Security Act and Regulations Various reports and publications by the Barbados Statistical Service and Central Bank of Barbados 45 | NATIONAL INSURANCE & SOCIAL SECURITY 15TH ACTUARIAL REVIEW (2012 to 2014)
1.
2.

3.
National Insurance Fund
Funeral Grant.
• Non-contributory pensions: Old Age Contributory (for existing pensioners at December 31, 1999) Unemployment Fund Severance Payment Fund • Employer Payments • Rebates Employed and self-employed persons between 16 and pensionable age (66½ years effective January 2014) are covered for the above contingencies as follows: • Employed persons in the private sector: All contingencies.
• Temporary government employees: All contingencies except severance.

• Permanent government employees: All contingencies, except sickness, unemployment and severance.
- erance.
are below $91 per month, no contributions are payable.
Earnings include basic salary and all other remuneration in cash or kind such as bonuses.

Starting 2005, the earnings ceiling has been indexed annually in line with changes in average wages.
The weekly and monthly ceilings on insurable wages has increased since 1967 as follows: Period 1967 - 1973 1974 - 1977 1978 - 1981 1982 - 1984 1984 - 1986 1987 - 1991 1991 - 2004 2005 2006 Weekly Monthly $50 $130 $230 $ $506 $ $598 $ $600 $ $715 $ $736 $ $759 $ $1,000 $ , $2,200 $ , $2,600 $ , $2,600 $ , $3,130 $ , $3,190 $ , $3,290 $ , Period 2007 2008 2009 2010 2011 2012 2013 2014 - 2016 2017 Weekly $782 $819 $858 $ $900 $ $944 $ $965 $ $985 $ $1,006 $ , $1,073 $ , Monthly $3,390 $3,550 $3,720 $ , $3,900 $ , $4,090 $ , $4,180 $ , $4,270 $ , $4,360 $ , $4,650 $ , 46 | NATIONAL INSURANCE & SOCIAL SECURITY 15TH ACTUARIAL REVIEW (2012 to 2014) Contributions are computed as a percentage of insurable earnings.
Rates of contributions vary according to the type of employment.

The contribution rates applicable to the four main categories of contributors in effect in January 2015 are shown below.

Contributions are computed as a percentage of insurable earnings.

Rates of contributions vary according to the type of employment.

The contribution rates applicable to the four main categories of contributors in effect in January 2015 are shown below.
National Insurance & Non- Unemployment Pensions Severance E’ee E’er E’ee E’er
E’er E’ee E’er
and Employer respectively.
The average contribution rate payable in 2015 for National Insurance and Non-Contributory pensions is A.2.1.
LONG-TERM BENEFITS (a) OLD-AGE CONTRIBUTORY PENSION Contribution Requirement: 500 paid or credited weekly contributions of which 150 must be paid.

Age Requirement: Full Pension: Normal pension age: 66½ from 2014 to 2017 and 67 thereafter.

Pensions payable at normal pension age are not dependent on retirement from the workforce.

Reduced Pension: 60 years to normal pension age.

This pension is dependent on retirement from the workforce.

Increased pension: From normal pension age to age 70.
Old Basis:
attaining normal pension age up to 2012.
47 | NATIONAL INSURANCE & SOCIAL SECURITY 15TH ACTUARIAL REVIEW (2012 to 2014) New Basis:
Transition:
Transition:
Minimum Pension: The listed minimum pension is $179.00 per week effective January 2014 to December 2016.
The minimum pension and all pensions will increase each year in accordance with the lesser of 3-year average (b) OLD AGE CONTRIBUTORY GRANT Contribution Requirement: 50 paid or credited weekly contributions.
Eligibility: Other than for the contribution requirement, the applicant must be eligible for Old Age Contributory pension.
This amount is paid as a lump sum.
(c) INVALIDITY PENSION Contribution Requirement: 150 paid weekly contributions.
of work, and less than normal pension age.
Duration of Pension: Payable for as long as invalidity
 continues or until normal pension age when converted to an Old Age Contributory pension.
Minimum Pension: As for Old Age Contributory pension.

(d) INVALIDITY GRANT Contribution Requirement: 50 paid or credited weekly contributions.

Eligibility: Other than for the contribution requirement, the applicant must be eligible for Invalidity pension.
48 | NATIONAL INSURANCE & SOCIAL SECURITY 15TH ACTUARIAL REVIEW (2012 to 2014) (e) SURVIVORS’ PENSION or Old Age Contributory pension.
Eligibility: Widow or widower married for at least three years (includes common-law spouse) or a child who is under age 16, up to age 25 if in full-time education or invalid.
married for at least 3 years; Child: 16
 Child (orphan or disabled): 33
• Widow or widower age 45 or over at time of death and married for 3 years, or disabled: • • For a widow or widower under age 45 and not disabled: one year.
For children, age 16 or 25 if in full-time education, for as long as invalidity continues, if invalid.

(f ) SURVIVORS’ GRANT Contribution Requirement: 50 contributions paid or credited by the deceased insured person.

Eligibility: Other than for the contribution requirement of the deceased, the applicant must be eligible for survivors pension.
(g) NON-CONTRIBUTORY OLD AGE PENSION Eligibility: Current normal pension age or over, or in the case of a blind person or a deaf mute aged 18 or over.
Applicant must also be a Barbados citizen or a permanent resident who has lived in Barbados for a period of: For a citizen: 12 years since attaining age 40 or an aggregate of 20 years since attaining age 18; For a permanent resident: 15 years since attaining age 40 or an aggregate of 20 years since attaining age 18.
1999 are being met by the Consolidated Fund.
The pension payable is reduced to take account of any other pensions being received.

49 | NATIONAL INSURANCE & SOCIAL SECURITY 15TH ACTUARIAL REVIEW (2012 to 2014) A.2.2.

SHORT-TERM BENEFITS (a) SICKNESS BENEFIT Contribution Requirements: 7 weekly paid or credited contributions in the quarter but one before the quarter in which the person became ill and either, i.
39 weekly paid or credited contributions in the four quarters ending with the quarter but one before the quarter in which the person became ill, or ii.

Person is engaged in employment immediately before becoming ill. Self-employed persons must satisfy criteria (i).
of illness separated by less than thirteen weeks are treated as one.
and 75 contributions paid or credited in the preceding three contribution years.
(b) MATERNITY BENEFIT Contribution Requirement: For an employed person, insured for at least 26 weeks, and paid at least 16 contributions in the two quarters For a self-employed person, not less than 39 contributions should have been paid or credited in the four quar-
 -
c) MATERNITY GRANT
c) MATERNITY GRANT whose spouse has paid the number of contributions that would have enabled the woman to qualify for Mater-
 Amount of Grant: $1,150 effective January 2014 to December 2016.
This amount will increase each year in 50 | NATIONAL INSURANCE & SOCIAL SECURITY 15TH ACTUARIAL REVIEW (2012 to 2014) (d) FUNERAL GRANT Eligibility: Insured person had made at least 50 paid contributions, or if fewer, would have been entitled to either of Sickness or Maternity.
A grant is also payable in respect of the death of the spouse of an insured in respect of whom a grant would have been payable had he/she died.

Amount of Grant: $1,995 effective January 2014 to December 2016.
This amount will increase each year in A.2.3.
EMPLOYMENT INJURY BENEFITS (a) INJURY BENEFIT Eligibility: Incapable of work as a result of an accident arising out of insured employment, or as a result of a prescribed disease.
or disease occurred.
(If past employment is for a shorter period, the average insurable earnings of the last 13 weeks, or if less, of someone in similar employment, will be used.)
- ods of incapacity separated by less than eight weeks are treated as one.
(b) DISABLEMENT BENEFIT Eligibility: Disablement resulting from an accident at work or a prescribed disease.
degree of disablement is paid.
(c) DEATH BENEFIT
earnings of the deceased may also qualify.
A.2.1(e)) Other dependants receive 16 51 | NATIONAL INSURANCE & SOCIAL SECURITY 15TH ACTUARIAL REVIEW (2012 to 2014) (d) MEDICAL EXPENSES Expenses Covered: • Medical, surgical, dental and hospital treatment, skilled nursing services and supply of medicines.
• Travelling expenses to obtain any of the above.
(e) FUNERAL GRANT Condition of Payment: Death of insured must be related to employment.

(Only one funeral grant is payable.)

CARICOM Agreement On Social Security Some former contributors with fewer contributions than required for Age, Invalidity and Survivors pensions, may qualify for a pension under the CARICOM Agreement on Social Security based on the total of all contributions made in participating countries.

A.2.4.

UNEMPLOYMENT BENEFITS Contribution Requirement: Insured for at least 52 weeks.
• • 20 weekly contributions paid or credited in three consecutive quarters ending with the quarter but one before that in which unemployment began.

• 7 weekly contributions paid or credited in the quarter but one before that in which unemployment began.
unemployment began.
Two periods of unemployment separated by less than thirteen weeks are treated as one.
occurred) a maximum of 26 weeks in the last year.
Between August 2010 and June 2012 the maximum duration was 40 weeks.

52 | NATIONAL INSURANCE & SOCIAL SECURITY 15TH ACTUARIAL REVIEW (2012 to 2014) A.2.5.

SEVERANCE PAYMENTS The Severance Payments Scheme provides for the payment of compensation to employees who are dismissed by reason of redundancy or natural disaster or who terminate the contract of employment after a period of lay-off or short-time.
Under the scheme: • The severance payment is payable to the employee by the employer, • If the employer refuses or is unable to make such payment the Severance Fund makes the payment to the employee; (the payment is then recoverable by the National Insurance Board from the employer) • An employer who pays the employee a severance payment in accordance with the Severance Payments Employees aged 16 to normal pension age are covered for Severance payments with the following exceptions: • persons employed in the Public Service, by any Statutory Board or in employment that is pensionable under any enactment; • persons employed by their husbands or wives; • domestic servants who are closely related to their employers; • partners, independent contractors and freelance agents.
Eligibility: The employee must have completed 104 continuous weeks of employment with the same employer.
• 2.5 weeks basic pay for each year worked, up to 10 years; • 3 weeks basic pay for each year worked between 10 and 20 years; • 3.5 weeks basic pay for each year worked between 20 and 33 years.
53 | NATIONAL INSURANCE & SOCIAL SECURITY 15TH ACTUARIAL REVIEW (2012 to 2014) Appendix B : Methodology, Data and Assumptions This actuarial review makes use of the comprehensive methodology developed at the Financial and Actuarial
The actuarial valuation begins with a projection of Barbados’ future demographic and economic environment.
into account both recent experience and future expectations, with emphasis placed on long-term trends rather than giving undue weight to recent experience.
Projections have been made under three assumption sets for which the demographic and economic assumptions vary.

B.1 Modelling the Demographic and Economic Developments The general Barbados population has been projected beginning with totals obtained from the 2010 national census and by applying appropriate mortality, fertility and migration assumptions.

For the Best Estimate scenario the total fertility rate (TFR) is assumed to remain at 1.65.
For the Pessimistic and Optimistic scenarios, total fertility rates are assumed to gradually reach 1.6 and 1.7, respectively, in 2021, remaining constant thereafter.
Age Group 15 - 19 20 - 24 25 - 29 30 - 34 35 - 39 40 - 44 TFR Ultimate Fertility Rates 2014 Optimistic Best Pessimistic 0.045 0.085 0.078 0.073 0.041 0.012 1.65 0.046 0.087 0.081 0.075 0.043 0.012 1.70 Estimate 0.045 0.085 0.078 0.073 0.041 0.012 1.65 0.043 0.082 0.076 0.071 0.040 0.011 1.60 Mortality rates have been determined using United Nations life tables for Latin America.
These rates have been adjusted to model closely the actual number of deaths in Barbados from 2010 to 2014.

Improvements in life expectancy for the Best Estimate scenario have been assumed to follow the “slow” rate as established by the United Nations with a “medium” rate assumed for the Pessimistic scenario and “very slow” for the Optimistic scenario.

Sample mortality rates for the Best Estimate scenario and the life expectancies at birth and at age 67 for sample years are provided in Table B.2.
54 | NATIONAL INSURANCE & SOCIAL SECURITY 15TH ACTUARIAL REVIEW (2012 to 2014) Table B.2.
Sample Mortality Rates and Life Expectancies Males Females Age Life Expectancy at: Birth 76.3 78.1 79.8 79.5 81.5 83.3 Age 67 15.0 16.1 17.2 16.8 18.1 19.3 Life Expectancies At Age 67 2014 2074 Optimistic Best Estimate Pessimistic Male 15.0 Female 16.8 16.0 18.0 17.2 19.3 18.2 20.8 Net migration (in minus out) for each scenario and 10-year age group is shown below for years 2015 and 2040.
Table B.3.

Net Migration Age Optimistic 0 - 9 10 - 19 20 - 29 30 - 39 40 - 49 50 - 59 60 - 69 70+ All Ages (4) (5) (27) (13) (2) 0 0 0 (50) 2015 Best Estimate Pessimistic Optimistic Pessimistic 2040+ Best Estimate (8) (9) (13) (14) 51 57 25 28 6 7 (54) (25) (5) 0 1 0 (100) (81) (38) (7) 0 1 1 (150) 322 161 40 150 27 (1) (4) (3) 600 75 14 (0) (2) (1) 300 19 3 (0) (0) (0) 75 55 | NATIONAL INSURANCE & SOCIAL SECURITY 15TH ACTUARIAL REVIEW (2012 to 2014) The projection of the labour force, i.e.
the number of people available for work, is obtained by applying assumed
both males and females for ages above 59, participation rates are assumed to gradually approach the rates
 participation rates in 2014 and 2071.
Between these two years, rates are assumed to change linearly.
Males Age 2014 2074 Females 2014 2074 Year Males Females 17 22 27 32 37 42 47 52 57 62 67
2014 2024 2034 2044 2054 2064 2074 The projected real GDP divided by the projected labour productivity per worker gives the number of employed persons required to produce total output.
Unemployment is then measured as the difference between the projected labour force and employment.

Estimates of increases in the total wages as well as the average wage earned are required.
Annual average
assumptions may be found in Table 4.1.
B.2 Projection of National Insurance Income and Expenditure This actuarial review addresses all National Insurance Fund revenue and expenditure items.
For Short-term Projections of pensions are performed following a year-by-year cohort methodology.
For each year up to 2074, expenditure, is estimated.
Once the projections of the insured (covered) population, as described in the previous section, are complete, contribution income is then determined from the projected total insurable earnings, the contribution rate and contribution density.

Contribution density refers to the average number of weeks of contributions persons make during a year.
56 | NATIONAL INSURANCE & SOCIAL SECURITY 15TH ACTUARIAL REVIEW (2012 to 2014)
percentage of insurable earnings.
Finally, the end-of-year reserve is the beginning-of-year reserve plus the net B.3 National Insurance Population Data and Assumptions The data required for the valuation of the National Insurance Fund is extensive.
As of December 31st, 2014, required data includes the insured population by active and inactive status, the distribution of insurable wages among contributors, the distribution of paid and credited contributions and pensions in payment, all segregated by age and sex.
and collection of contributions, are determined with reference to the application of the Scheme’s provisions and historical experience.
Projecting investment income requires information of the existing assets at the valuation date and past performance of each class.

Future expectations of changes in asset mix and expected rates of return on each asset type together allow for long-term rate of return expectations.
Tables B.5 through B.12.
Table B.5.
2014 Active Insured Population, Earnings and Past Credits # of Active Insureds Average Monthly Insurable Earnings Average # of Years of Past Credits Age Male Female Male Female Male Female 15 - 19 20 - 24 25 - 29 30 - 34 35 - 39 40 - 44 45 - 49 50 - 54 55 - 59 60 - 64 65+ - 1,012 1,581 2,322 2,671 2,789 2,716 2,687 2,616 2,635 2,415 - 1.2 4.1 7.8 11.7 15.8 20.0 24.2 28.4 32.7 34.9 35.0 1.1 3.9 7.6 11.5 15.5 19.6 23.7 27.9 32.1 34.2 34.3 All Ages 52,060 62,263 2,725 2,526 19.1 19.0 57 | NATIONAL INSURANCE & SOCIAL SECURITY 15TH ACTUARIAL REVIEW (2012 to 2014) Table B.6.
Pensions in Payment - December 31, 2014 Old-Age Invalidity Survivors Disablement & Non- Male - - - - - - - - - - - - 981 4,023 3,249 2,308 1,372 698 300 78 9 Age 0 - 4 5 - 9 10 - 14 15 - 19 20 - 24 25 - 29 30 - 34 35 - 39 40 - 44 45 - 49 50 - 54 55 - 59 60 - 64 65 - 69 70 - 74 75 - 79 80 - 84 85 - 89 90 - 94 95 - 99 100+ # of Pensioners 13,018 Avg Monthly Pension $1,397 Female Male Female Male Female Male Female Male Female - - - - - - - - - - - - 1,031 3,835 3,318 2,471 1,588 883 406 130 27 - - - - - 4 20 43 65 156 300 450 652 - - - - - - - - - - - - - 4 20 48 81 144 324 582 780 - - - - - - - - 166 353 385 173 12 8 18 44 55 63 53 61 42 30 20 7 9 5 - - - - - - - - - - - 1 2 7 10 9 22 32 18 13 3 4 1 1 - - - - - - - - - - - - - - 281 171 68 32 7 - - - - - - - - - - - - 980 744 401 166 26 2 13,689 1,690 1,983 1,504 2,338 228 123 559 2,319 $1,150 $1,314 $1,143 $ 306 $ 703 $ 252 $ 226 $ 324 $ 324 Note: The average amount for Non-contributory
 pensions is the amount payable from the NIF.
The following table shows assumed density factors, or the average portion of the year for which contributions are made.

These rates are assumed to remain constant for all years.

Table B.7.
Density Of Contributions g Age Males Females 17 22 27 32 37 42 47 52 57 62 58 | NATIONAL INSURANCE & SOCIAL SECURITY 15TH ACTUARIAL REVIEW (2012 to 2014) Table B.8.
Rates of Entry Into Invalidity Age Males Females 17 22 27 32 37 42 47 52 57 62 - - 0.110 0.345 0.790 0.801 2.032 3.083 6.139 9.196 - - 0.191 0.281 0.670 0.814 1.604 3.463 5.132 6.801 groups by the age of the deceased.
Table B.9.
Probability of a Deceased Having Eligible Survivors and Their Average Ages Males Females Probability Avg # of of Eligible Eligible Spouse Children Probability of Avg # of Eligible Spouse Eligible Children Age 17 22 27 32 37 42 47 52 57 62 67 72 77 82 87
59 | NATIONAL INSURANCE & SOCIAL SECURITY 15TH ACTUARIAL REVIEW (2012 to 2014) Appendix C : Projection Results – Alternate
 Scenarios Table C.1.
Projected Barbados Population, All Scenarios Year All Ages 0-15 16-66 67+ Age Depend.
Ratio 2010 2014 2020 2030 2040 2050 2060 2070 2020 2030 2040 2050 2060 2070 2020 2030 2040 2050 2060 2070
Best Estimate Optimistic
Pessimistic
60 | NATIONAL INSURANCE & SOCIAL SECURITY 15TH ACTUARIAL REVIEW (2012 to 2014) Table C.2.
Projected Cash Flows and Reserves, Pessimistic Scenario (millions of $’s) Income Expenditure Reserves Year’s Expenditure 794.6
(225.5) 1,739.0 (734.5) 4,222 4,525 4,709 4,973 5,057 5,211 5,409 5,599 5,760 6,252 5,610 714 7.7 7.6 8.0 8.0 7.8 7.6 8.4 8.4 8.4 7.5 4.4 0.4 2054 1,187.1 (436.3) 2064 1,485.4 (1,371.7) 10.7 13.4 761.5 2,227.8 127.1 2,883.9 66.7 83.4 2,294.5 (1,533.0) (10,687) (4.7) 2,967.4 (2,840.3)
 (32,597) (11.0) 2074 1,850.2 (3,076.3) 16.7 (1,209.4) 3,774.9 103.9 3,878.9 (5,088.3) (72,447) (18.7) Note: Negative reserves indicate the indebtedness of the Fund and negative investment income is the current cost of servicing that debt.
Investment Income for 2012 to 2014 includes prior year adjustments and changes in unrealised investment gains.
61 | NATIONAL INSURANCE & SOCIAL SECURITY 15TH ACTUARIAL REVIEW (2012 to 2014) Year Old Age Cont.
Invalidity Survivors Non-Cont.

Short-term Employ.
Insurable Old Age Injury Wages GDP 2012 2013 2014 2015 2016 2017 2018 2019 2020 2024 2034 2044 2054 2064 2074
62 | NATIONAL INSURANCE & SOCIAL SECURITY 15TH ACTUARIAL REVIEW (2012 to 2014) Table C.4.
Projected Contributors and Pensioners, Pessimistic Scenario # of Pensioners Year # of Old Age Cont.

Invalidity Survivors Non-Cont.
Death & Contributors Old Age Disablement Total # of Pensioners Ratio of Contributors to Pensioners - - - 1.5
3.0 3.0 3.0 3.0 3.0 2.9 2.7 2.1 1.8 1.6 1.6 1.5 63 | NATIONAL INSURANCE & SOCIAL SECURITY 15TH ACTUARIAL REVIEW (2012 to 2014) Table C.5.
Projected Cash Flows and Reserves, Optimistic Scenario (millions of $’s) Income Expenditure Reserves Expenditure 859.2
(109.9) 8,590 13.5 1,865.2 2,140.5 84.4 2,224.9 (359.7) 6,347 7.7 7.6 8.0 8.0 7.9 7.7 8.5 8.6 8.7 8.6 7.5 6.3 4.8 2.9 2074 1,875.5 11.3 16.9 1,903.7 2,771.1 105.4 2,876.5
 (972.8) (273) (0.1) Notes: Negative reserves indicate the indebtness of the Fund and negative investment income is the current cost of servicing that debt.
Investment Income for 2012 to 2014 includes prior year adjustments and changes in unrealised investment gains.
64 | NATIONAL INSURANCE & SOCIAL SECURITY 15TH ACTUARIAL REVIEW (2012 to 2014) Year Old Age Invalidity Survivors Non-Cont.
Short-term Employ.

Insurable GDP Cont.
Old Age Injury Wages 2012 2013 2014 2015 2016 2017 2018 2019 2020 2024 2034 2044 2054 2064 2074
65 | NATIONAL INSURANCE & SOCIAL SECURITY 15TH ACTUARIAL REVIEW (2012 to 2014) Table C.7.
Projected Contributors and Pensioners, Optimistic Scenario # of Pensioners Year # of Contributors Old Age Cont.

Invalidity Survivors Non-Cont.
Total # of Old Age Disablement Pensioners Death & Ratio of Contributors to Pensioners - - - 2.0
3.0 3.0 3.1 3.1 3.1 3.1 2.9 2.4 2.2 2.2 2.1 2.0 66 | NATIONAL INSURANCE & SOCIAL SECURITY 15TH ACTUARIAL REVIEW (2012 to 2014) Appendix D : Income, Expenditure and Reserves, 2012–2014 (Expressed in Millions of $’s) 2012 2013 2014 Income Contribution Income Investment Income Other Income Total Income Expenditure
Maternity Grant Travelling Expenses Medical Expenses
Administrative Expenditure Total Expenditure 570.3 273.8 5.0 849.1
5.0 849.1 0.3 0.1 0.5 33.2 548.4 598.0 276.6 5.1 879.8 532.1 266.2 5.6 803.9 0.3 0.1 0.4 0.3 0.0 0.4 29.2 593.4 27.3 587.8 Excess of Income over Expenditure 300.7 286.4 216.0 Change in Unrealised Investment Gains & Prior Year
 Adjustments (18.1) 16.3 (31.7) Reserves at End of Year 4,222.5 4,525.1 4,709.5 67 | NATIONAL INSURANCE & SOCIAL SECURITY 15TH ACTUARIAL REVIEW (2012 to 2014)
Funeral Grant
Non-Contributory Old Age Pension Medical & Travelling Expenses p g
Total 16.27% 16.98% 18.96% Table E.2.
Pensions In Payment, Awarded & Terminated, 2011- 2014 Pension Type Dec. 2011 2012-2014 2012-2014 Dec. 2014 Paid in Awarded Terminated Paid in Age Invalidity Survivors Disability Death 23,309 3,711 1,795 292 36 10,356 2,209 1,285 390 1,285 (6,958) (1,730) (325) (361) (1,291) 26,707 4,190 2,755 321 30 68 | NATIONAL INSURANCE & SOCIAL SECURITY 15TH ACTUARIAL REVIEW (2012 to 2014) 69 | NATIONAL INSURANCE & SOCIAL SECURITY 15TH ACTUARIAL REVIEW (2012 to 2014) 70 | NATIONAL INSURANCE & SOCIAL SECURITY 15TH ACTUARIAL REVIEW (2012 to 2014)