FOR A long time now, the dilemma has been a familiar, if somewhat abstract, one. As the population continues to age and fertility levels decline, how does the country fund the needs of an increasing number of elderly people? The number of people aged 60 years and older has been increasing exponentially over the past five decades. About 14 per cent of the population are elderly. Meanwhile, projections suggest the number of young people fell by almost 12 per cent between 2010 and 2020. The tangible impact of these shifts has been brought home by the latest report by the National Insurance Board (NIB), recently tabled in the House of Representatives.
According to that report, a deficit in the National Insurance Scheme (NIS) has worsened over the past five years from $226 million in 2018 to $1.2 billion in 2022. It is tempting to see this as a natural reflection of the shifting population sands: while contributions have been stable at about $4.7 billion, from 2020 to 2021 hundreds of millions were shaved off while benefits paid out leapt by $360 million. Last year, the pattern continued, with a $174 million jump in demand in benefits offset by only $20 million more in contributions.
“Demographic factors continue to impact the NIB, highlighted by an increasing beneficiary base and shrinking contributory base,” the report states.
Many questions will undoubtedly be asked of the management of NIB portfolio funds, which fall under separate management from other areas of savings, such as the Heritage and Stabilisation Fund, but it is clear enough that population dynamics have long informed the context of contributions over time.
It all points to what has long been a vexed question: should the State raise the retirement age?
We’ve heard the pros and cons rehearsed by policymakers and stakeholders, at home and abroad, over the years. Why should competent people be forced to retire before their time? Why should money be forked out to have such people remain on “contract” artificially in the public service?
On the other hand, some ask whether people must be forced to work for longer periods of time while little attention is paid to the cost of living. Though France eventually raised its retirement age from 62 to 64, that move came with considerable outcry, with protests bringing that country to a standstill.
The public may be sensitised to the nuances of this issue but look out for similar agitation here if there is no consultation with citizens or if key stakeholders like unions are ignored.
Meanwhile, the NIB’s report is sobering reading. Coming ahead of next Monday’s budget, when the Government will update us on its contemplation of moving the retirement age from 60 to 65, it is a reminder that time is running out. This once theoretical dilemma is now upon us.