NIS shoots itself in the foot

Finance Minister Colm Imbert ended talk of integrating the self-employed into the National Insurance Scheme (NIS) in the Senate on Tuesday.

Mr Imbert said the 2020 report of a committee convened to review the NIS warned of a necessary financial contribution by the government "in the millions of dollars to cater for older and low-income self-employed people."

The Finance Minister did not believe that money would ever be recovered.

But making that jump forward for NIS coverage might also add tens of thousands of working nationals into the scheme. The report acknowledged that a broader base of contributors would bring more money into the system, which it desperately needs.

The challenges facing the NIS fund have been public knowledge for some time.

In June 2019, the Finance Minister told the House of Representatives that the NIS had operated with a deficit of $226 million in 2018.

The most recent actuarial review of the NIS suggested an increase in contribution rates from 13.2 per cent of insurable earnings to 16.3 per cent and an extension of the pensionable age to age 65. Early withdrawals would result in a reduction in benefits by six per cent for each year.

Accessing the fund at age 60 would result in a monthly payment of $2,202 instead of $3,000, which would only apply at 65.

Neither proposal has met with any enthusiasm.

But without an infusion of cash, the fund is likely to run out of money, and that will be bad business for everyone; the government included.

Piloting the Miscellaneous Provisions Bill 2019, which included pension adjustments for judges, Mr Imbert spoke of a retired judge he knew whose medical payments ate up his $3,000 pension, leaving him to die in poverty.

Between its commitment to a national pension and the deficit facing the NIS, it's odd that the government would determinedly refuse the contributions of self-employed workers.

That position ignores the reality of modern employment, which is highly mobile and often fractured between formal employment, contract employment, consultancies and self-employment, with some enterprising individuals bouncing between all four classifications in the course of a career.

The NIS was created on the assumption that an employee would work until retirement in one or two businesses, and all its collection systems and financial models are designed to support that reality.

It has shut the door to self-employed people, even those who have contributed during years of employment, and adamantly refused to engage the reality of a business landscape that is improved by individual entrepreneurship.

An NIS crippled by inflexibility and unwilling to adapt its services to the employment patterns of the 21st century punishes the individual initiative this country needs to recharge its economy.