Anguilla’s Social Security Fund is in jeopardy of being depleted in fifteen years if it continues on its current trajectory. That assessment was made by Mr Derek Osborne, a member of the firm, LifeWorks, based in Canada, when he presented a summary of an Actuary Review to the House of Assembly on June 28, 2022.
Speaker of the House, Mrs Webster-Bourne, invited Mr Derek Osborne to present a report of the Actuarial Review of the Social Security Fund as of December 31, 2022, to the House, “because of the implications that the report might have,” she stated.
Mr Derick Osborne presented the Actuarial Review reports, explained the substance of those reports, and made recommendations to address the identified areas of concern.
He explained that the Social Security system in Anguilla exists to provide a safety net – an income protection for workers. Consequently, “the Social Security Act requires that, at a minimum of three-year intervals, an Actuary is engaged to look at the status of the fund to ensure that it is well-designed and well-managed to meet the obligations that have been promised.”
He noted further that the fund “is expected to meet the obligations of pensioners, not only in the short-term, but also for the long-term. [As such], the review looks forward 60 years into the future to make sure that the promises can be met. If they cannot be met under the current contribution rate and benefit rules, the Actuary makes some recommendations as to how best to fix whatever challenges are found.”
Projections of the fund from 2020, using a 10% contribution rate and the current rules that are in place today, indicate that it will be depleted in about 15 years. “We can expect the fund to be depleted between 2035-2038, if nothing is done,” Mr Osborne noted.
Looking at Anguilla’s population of about 15,000 in 2020, and growing to around 23,000 in 60 years, “the concern for the future is that we have an aging population with families having fewer children (~less than 2), a shrinking school-age population, a significant increase in the pensionable population, and eventually, a smaller labour force population.”
Mr Osborne explained that “most of the money in Social Security expenses goes towards age pension to the elderly, and the ballooning of the over 65 age population has serious implications for the Social Security Fund.
“We have expenditure exceeding total income – contributions plus investment income – and if the stock market remains negative, it won’t be long before we will have to tap into reserves regularly, within the next 2 years, to help meet benefit expenditure on a timely basis.”
He continued: “If we allow the fund to be depleted, the expenditure rate at that point in time will be over 20%, and we will have to raise the contribution rate from 10% to over 20% right away just to meet the benefit expenditure.”
Mr Osborne made the following recommendations to get the Social Security Fund on the right track in terms of adequacy of benefits payable to qualified persons, affordability of persons who are contributing to the system, and sustainability for generations of persons yet to come:
• increase the wage ceilings;
• implement a change in the wage formula for wages over $70,000;
• increase the pensionable age to 67;
• slowly increase the contribution rate to at least 12% over the next few years;
• improve compliance by adhering to effective governance guidelines.
“What we need to do now, is to adjust what we do, assess how best to meet the challenges of the next 20 or 30 years, and make reforms appropriately. Long term sustainability is the number one goal. Clear objectives and policy guidelines should lead to better decision making and timely actions,” Mr Osborne stated.
