FINANCE Minister Colm Imbert said all countries must consider the potential that longevity risk could pose to their pension systems.
Speaking at a webinar held by the Development Bank of Latin America (CAF) on Wednesday, Imbert said, "Given the unpredictable nature of the current pandemic, the real effects of covid 19 on mortality and morbidity will not be known for a number of years."
Over the last 50 years, he said, life expectancy at birth in Trinidad and Tobago has grown substantially, from 64.8 to 73.6 years. Imbert said the UNs projects that average life expectancy in TT will increase to over 83 years within this century. He credited improvements in medicine and medical technology for this development.
He said this brings the issue of longevity risk, where people's lifespans exceed their life expectancies, into focus, and in these situations, people could run out of resources to support themselves.
"This shortfall in retirement resources by the individual ultimately increases the obligation on the State for support."
Imbert said said the National Insurance Scheme (NIS) provides some level of insurance and pension benefits for almost 600,000 people, mostly in the form of retirement benefits.
The 10th Actuarial Report into the NIS, he said,showed the proportion of people over 60 being supported by the NIS increased from 11.7 per cent in 2005-2007 to 14.2 per cent in 2013-2016.
While the life expectancy of the 60-plus population has increased steadily over the last 50 years, he pointed out, birth rates have decreased during the same period. The National Insurance Board (NIB) has projected that by 2066, the 60-plus population in TT will be almost double, while the group the populations relies on to sustain the fund (NIS) – the 16-59 age group – will decrease by at least 25 per cent.
Imbert said no decision has been taken and various different options are being considered to sustain the fund, such as increasing the retirement age from 60 to 65..
Government is also examining the possibility of fully incorporating informal workers into the NIS. He said this could provide needed coverage for the most vulnerable in society and provide support for the NIS' long-term sustainability.
But he said many of these workers have little money to save towards retirement, prefer to keep any savings in liquid form to support themselves and their relatives and are not attracted to long-term financial vehicles like the NIS.
Imbert attributed this hesitancy to a lack of knowledge.
He said this is why Government supports various financial-literacy initiatives such as those offered by the Central Bank to educate citizens on these matters.
In 2017, he said, the NIB estimated that retirement benefit expenditure cost $3.8 billion.
Today the NIB provides services to 588,000 beneficiaries, compared to 108,116 when it was launched 40 years ago.