Kristen Gyles | Pension education and retirement poverty

One thing that is almost too taboo to talk about is the amount of money the Government spends on poor relief, especially for the elderly. The Government is expected to spend close to $4 billion on social intervention this year, $1.1 billion of which is for pension poverty alleviation. This doesn’t include standard public assistance programmes like PATH and rehabilitation or social intervention programmes.

At the end of the day, we are all Jamaicans and as a nation, we are only as strong as our weakest link. So, the Government rightly extends considerable resources to vulnerable groups across the Jamaican society. However, if we are honest, some of the traditional social safety net spending in Jamaica could be reduced through public education. For example, the poorest in Jamaica are, in many cases, the oldest. This is largely because there just isn’t a very strong culture of investing towards the future.

Instead, the most crucial element of retirement planning for many people, culturally, is having kids. By the time the child is old enough to talk, they are well indoctrinated on their ‘purpose’ in life, which is to be mommy and daddy’s pension.

The truth is, many adult Jamaicans are pensions for at least one elderly person in their lives. The money they spend on taking care of the elderly persons under their care is an added recurring expense that can neither be negotiated nor calculated beforehand. Further, the medical bills get longer and more expensive as the elderly age.

COSTS MONEY

Getting old costs money. And yet, it is in old age that most persons find they are either penniless or have total reliance on the pittance provided by their National Insurance Scheme (NIS) benefit. But, not to worry, their children are their pensions!

So, we’re looking at a culture that not only unnecessarily pulls on the public purse but contributes directly to the financial hardship of the younger working class. Again, this is largely a public education problem. We speak often about the importance of saving for a rainy day but don’t realise that retirement is perhaps the longest rainy day for someone with no pension.

As at March 31, 2022, the Financial Services Commission reported that 142,778 persons or just over 11% of the employed workforce was enrolled in a private pension plan. And to add to that, only about 18% of the employed labour force is expecting a pension when they retire, either from a private pension plan or the public sector pension scheme.

That aside, the full rate pension provided by the Government is $3,400 per week. A retired person living off this amount is significantly poorer than someone earning the minimum wage of $9,000 weekly. We’ve had conversations surrounding the minimum wage and how it can be transitioned into a liveable wage. So, if the minimum wage isn’t ‘liveable’ currently, what the NIS distributes as benefits certainly isn’t ‘liveable’. Something tells me many people don’t know this.

Furthermore, the NIS seems to be gearing up for retirement itself. It is unclear for how much longer the NIS will last with the current rate of contributions coming in. At the beginning of 2019, just under 50% of the working population was registered with the NIS and at the same time, the NIS was intended to provide a social benefit to the entire working population.

To demonstrate the debatable unviability of the NIS, for the 2019/2020 fiscal year, NIS pension benefits alone amounted to roughly $19.4 billion. Contributions, not including NHF collections, were just about $20.4 billion, covering roughly the cost of the benefits for that year. This is not unusual in our context but is certainly not the idea of a well-funded scheme.

MAKES NO SENSE

It therefore makes no sense depending solely on the NIS for retirement. Again, public education is critical here.

And then of course, to be balanced, in an economy where many live under the minimum wage belt, and are living hand-to-mouth, we know that not everyone will have a pension.

Early last year, a Gleaner report “Could you live off $30,000 a month?” published as a part of an investigation into how persons were making the minimum wage stretch. The report told the story of one woman who was laid off during the pandemic and subsequently became a beneficiary of the Government’s $10,000 CARE grant. She recounted what things were like during the time she spent working in a restaurant. She said she would make $8,000 on a week where she worked six days and $10,000 on weeks where Sundays were included.

The story went on to highlight that her boyfriend took care of her daughter’s schooling and helped with paying light and water bills.

This story got me thinking about so many things, chief of which was, what will happen to this woman when she retires? If she needs help just to survive, while working six or seven days a week, how much help will she need when she can no longer work? And will that help still be around?

This is just a part of the Jamaican reality, and it doubtless puts a damper on the thrust towards educating the public on the importance of financial planning. People can’t save out of what they don’t have.

Nonetheless, there is a slew of persons who simply haven’t given thought to the boring issue of the future that lies ahead. In these uncertain times, it seems the apathy towards planning for the future is largely born out of anxiety that the future might not actually come. But what if it does?

Kristen Gyles is a free-thinking public affairs opinionator. Email feedback to kristengyles@gmail.com.