Management of the Montserrat Social Security Fund are sounding the alarm that urgent attention and measures must be taken to stem the quickly depleting resource. Officials there are calling on the government to implement a series of recommendations aimed at ensuring the fund does not run out by 2025, as experts are predicting it will.
“The Fund is now facing a crisis that if left unchecked could have a serious effect on how the Fund will meet its current and future obligations. Given that the Social Security is funded mainly by contributions and investment returns there is direct correlation between the number of individuals contributing to the Fund, the contribution rate, returns on investments and benefits paid,” a release on their website read.
The SSF said “the right to social security is a recognized human right and establishes the right to social security assistance for those unable to work due to sickness, disability, maternity, employment injury, unemployment or old age.”
The release provided background to the establishment of the fund in 1986 “through the Social Security Act Cap. 18.09 to administer a benefits system that allows individuals to make contributions during their working life and receive a benefit when they retire. At the time the Fund was designed Montserrat had a population of over 10,000 persons and a working population of over half that number and the economic prospects were predictable and positive. Over the last 20 years, the circumstances have changed significantly as the population decreased to less than 5,000 following prolonged volcanic eruptions that started in 1995 and a global economic and financial crisis in 2008 that shattered returns on investments.
“Over the past years, the Fund has been utilizing its reserves to meet the shortfall in its operations and this year it is expected to use a further $4.1m of its reserves. The experts have warned that if we do not make the necessary adjustments to the Fund with some urgency, the Fund’s reserves are expected to be depleted by 2025.
“As we are aware, Montserrat has an ageing population and the number of persons receiving a pension is increasing at a faster rate than the persons contributing to the Fund. The current ratio is two persons contributing for each pension paid. This is a real challenge as 12 years ago there were four persons contributing to each pension paid – ideally the preferred ratio would be six persons to each pension.
“For some time the Board has been concerned with the Fund’s declining financial position and have made several recommendations to the Government of Montserrat (GoM). These include:
- Increase the contribution rate
- Eliminate the reduced Early Age pension
- Make all workers contribute to the Fund
- Take steps to increase employment
- Inject funds into the SS Fund in accordance with the Act until the economy recovers
“Based on the significance of Social Security to this island, as it impacts both young and old, we are hopeful that the GoM will facilitate most, if not all, of these changes in a timely manner, thereby putting the Fund on a path of sustainability,” the statement read.