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CEO Palma also spoke candidly about the wage band review currently being proposed by the Social Security Board. He explained that demographic pressures are forcing the institution to examine contribution levels more closely.
Jerome Palma, CEO, Social Security Board: “Structural changes are important where we move away from what are outdated structures and systems that they worked very well for a pen and paper structure in 1981. We have a more mature scheme, a more mature system that is in place. We can effectively go into an approach that is more conducive for long-term now. There are those demographic changes like you rightfully said where we do see the replacement rate is less than two. So people are having less than two children on average. So the workforce is not then being replaced as quickly as you will to support the retirees. Fund sustainability is one of the key items for us and it’s not just how do we invest but how do we sustain in terms of the demographic changes, the shifts that we see in population, in benefit entitlements, what we are experiencing now which is an increase in people who are retiring and earning a pension. And that is a faster growth than people who are now joining the scheme to contribute. And the Social Security system is based on pooled contribution. So it is a support system that is so structured that the active workers are then supporting a lot of the benefit for the future.”
According to the CEO, the proposal is driven largely by shifting workforce patterns where fewer young contributors entering the system while the number of retirees drawing benefits continues to grow. He was careful to clarify, however, that the adjustment being discussed is targeted.
Jerome Palma, CEO, Social Security Board: “We discussed one of the shifts that we are looking at, the move from a wage band system to a percentage-based system. We see where that is now moving from 13 different band where depending on where you lie on the band you pay on that amount and it’s a fixed amount there. To a percentage-based system that’s going to scale up as you scale up. As you earn more, it’s going to be reflective as well in your benefit side. So that’s the proposal, that’s the shift that we are looking at. In doing that, there’s no shift that we’re proposing to change the ceiling. What we are looking at though is to establish a new contribution floor. We recognize where the contribution floor the under 70, I mentioned earlier people pay who are earning under $70, they pay based on the rate of $55. That’s the current contribution that they make based on that $55. So we find that people who are contributing at that level are contributing effectively 10%, $5.50. that’s what they’re contributing on a weekly basis. The challenge that we see is not just on the contribution side but on the benefit side. They contribute at that, the actual contribution that they get, the benefit that they would be entitled to is significantly less than even our minimum by law, which is $47. So you find that people contribute for years at that level and what they get back in terms becomes the minimum by law for the seven because it’s not even sufficient to pay that. And we must ask ourselves, what can you for all practical intents and purposes sustain yourself with $47 weekly as a retirement benefit? We have run the numbers, yes. I would say just for an appreciation, contributing at just the lowest level, $55. benefit-wise would give you a calculated benefit between $16.50 and $33.00. We don’t pay that because our minimum that we can pay out is $57.00 by law. So we pay $47. Moving to the contribution and the flow of $130, contributing at that level which a lot of persons may not, but contributing at that level for the career would take you up to $78, which is a better benefit for retirement and the rest of life than the current $47.”
CEO Palma noted that contributors at the lower end of the scale would pay somewhat more, but emphasized that the adjustment is intended to significantly improve their eventual benefit payouts. The SSB head also used the opportunity to remind the public that the Board offers a broad range of social protection benefits that go beyond what many Belizeans may assume.
English (US) ·