The pension problem: Ageing population, fewer workers raise concerns about national scheme

Old age pensions are the topic of global conversations about rising fears that as people age, those schemes can’t be sustained. It is referred to as the Pensions Crisis.

From as early as 1999, British economist John Eatwell spoke to The Anatomy of the Pensions Crisis in an economic survey of Europe.

A 2022 Harvard Business Review article said, according to UN reports, two-thirds of the global population lives in countries with below-replacement fertility rates, while average lifespans continued to grow.

That meant many populations were rapidly ageing, and would begin to shrink, it said.

This is also a looming issue for the TT government. The Central Statistical Office, in its June 30, 2022 mid-year population report, estimated TT’s 65-plus population at 122,412.

One provision for people over 65 in TT is the Senior Citizens’ Pension.

The Ministry of Social Development and Family Services’ website says the pension is a grant accessible to citizens over 65, who must have lived in the country for 50 years and have a monthly income not exceeding $5,500.

To receive the grant, one must fill out an application form, then attend an age-assessment meeting with the Local Public Assistance Board. The ministry’s welfare officers do a means test for eligibility for the grant. The board then decides on the application.

Minister: Government pension not for all

Social Development and Family Services Minister Donna Cox said to give every citizen who turned 65 a pension would be unsustainable.

“How sustainable would it be if we just gave everyone who wanted a pension one?”

There are 105,000 people receiving a pension from the ministry, she said.

And there are more to come. Through its centenarian programme the ministry has recognised that many people are living longer. This is a factor in the sustainability of the pension fund.
The Government aims to continue taking care of TT’s senior citizens, but thinks some people might believe they are entitled to it.

“That is not the case. The pension is intended for people who are vulnerable. You are finding people applying for pension and are people who are landowners, homeowners and wealthy but feel they should still receive that $3,500,” she said.

But in fact, “Everything that comes out of the Ministry of Social Development and Family Services is for the vulnerable. It is not for people who have.”

“We know there are many people on the system that should not be there,” Cox added.

The ministry was hoping to correct this through its ongoing digitalisation efforts.

The grant is targeted at widows, domestic helpers, single mothers and people who were not employed throughout their lives.

“If you are receiving the National Insurance Scheme (NIS) and it is the same amount as the old age pension, then you do not get it. It means you worked somewhere, and you are entitled to NIS,” she said.

Retirees: crunching the numbers

It's not only sustaining the system that concerns government officials, but also the actual use of the funds.

Cox said her ministry had found people who were not being taken care of by family and caregivers. The ministry was “beefing up” inspectors in its Division of Ageing to address this problem, she said.

“There are children who are living on their parents’ pension when they can work. They should be taking care of their parents and not having to depend on a pension.”

She said the ministry would also host seminars for caregivers on how to care better for the elderly, including their financial health.

General practitioner and gerontologist Dr Lorraine Patience pointed out another consequence of an ageing population: “When you reach 80 or 90, your children have now reached the end of their working lives and having to support their older parents, plus now looking to be able to support themselves on their pension.

“So it has a big knock-on effect.”

She believes many societies will have to overhaul pension systems as people live longer.

“If people stop working at 60-65 and they are going to live to 100-plus, there is no way that you are going to be able to sustain the pension schemes as they exist now.

“It cannot continue as it is, it is what do you develop it into?”

The Government cannot say a pension will only be paid until someone reaches 90, because that was unethical, she said.

Patience said more research was needed into what could be done for financial stability for people as they age.

“Your working population is reducing in size, and at the same time, your elderly population, who depend on the pension, is increasing in size.

“It is different from people who are 20, who may be able to put things in place in terms of private pension schemes or financial ways of having money post-retirement.

“People who have nearly worked their entire working life – if they are going to live another 30 or 40 years, and we do not have a pension scheme that is going to be able to sustain them – who is going to look after those people?”

Pensions plus

For Patience, any discussion about pensions – old age or otherwise – must include one on health.
As people grow older, some start having medical issues. She knew of people in their 80s, with a lot of health problems, but unable to afford the care they needed on the pensions they receive.
Some of her patients’ medications cost $2,000 every month against a pension of $3,500 and they also live in rented homes.

“They may also need to have a caregiver at home costing $12,000 and upwards, depending on how much care they needed. It becomes where your pension is nowhere near going to be able to afford that."

While financial measures are one way to “keep body and soul together” for that demographic, they are not the only mechanism.

UWI economics lecturer Dr Marlene Attzs said things like the Chronic Disease Assistance Programme (CDAP) system and subsidised travel on the Public Transport Service Corporation (PTSC) service, ferry to Tobago and other measures were put in place to help that demographic with their costs.

In a phone interview, she said the sustainability of the senior citizens' grant would depend on Government’s revenue streams and economic position.

The Government has maintained it is not going to do away with the pension, Attzs said. But the pension might not increase anytime soon, as the Government was challenged in terms of its overall economic position.

“The issue that really undergirds that is a larger economic issue in terms of the inflation rate and how the inflation rate impacts on people who are on fixed incomes.”

She said people had $3,500 and, on a good day, that could meet their financial needs, but on a not-so-good day, when the country was facing inflationary pressures and increased costs, it could not.

“This is where the sustainability comes in...Whether or not that $3,500 is sufficient to keep body and soul together for the average senior citizen. And that is a conversation one can have.”

Other economic measures such as CDAP buffered the $3,500 from the erosion of its purchasing power.

“You can probably expand the CDAP net. I don’t know offhand what the CDAP net captures now in terms of the medication that old age pensioners get and the availability of that medication.”

Attzs said some senior citizens lived on their own, but some also lived in households where there were younger people who could “bear the burden” of increased costs. This was opposed to senior citizens who lived on their own and bore all costs on their own.

She added that it was important to collect data such as a household budgetary survey or a survey which would give a “very clear picture of the living conditions of our senior citizens.”

No easy answers on care

Asked if retirement communities might be a solution to the pension question, Patience said they were a big advantage, as there are a lot of services within those communities, but they required substantial investment and maintenance.

The communities also encourage activity, which is important for people as they age, she said.

“As you transition and become older, a lot of these places have different levels of care needs. You might be able to move from independent living to more assisted care and full care, and you would not have to move out of your community...

“In terms of the quality of life, and what you want people to have as they age, absolutely that should be the way forward.”

TT’s culture was not retirement communities, but more homes for the aged were popping up because of the need.

Patience also pointed to the growing number of single people.

“That is a reality for a lot of people. How that relates to your pension schemes is a little bit different, in terms of what your social system needs to support a little bit more.

“Things have to be put in place for people who are single to age comfortably and safely. Part of that is the responsibility of the Government and the general population.”

Attzs said TT needed to be more courteous to its senior citizens.

Speaking on an issue she raised years before, Attzs said financial institutions needed to do more for that demographic, as some of them stood in long lines from as early as 5 am on the first and second of the month to collect the funds.

But, she stressed, “I don’t think a response is simply to say we want all of them to move online so we can send them direct deposits. Some people want to go to the bank so they can catch up with their friends they see in the bank and in the line, they can get caught up with the latest news about people’s families. etc. I don’t think we should deprive our senior citizens of that opportunity.

"But I certainly think it is quite disheartening to see some of these long lines…,” she added.
As for the suggestion of retirement communities, Attzs said she did not know enough about their sociology to make an assessment.

She said sometimes, the decision to house someone in a senior citizens' home is traumatic both for them and their families. This, too, required more data and analysis.

Older population, older workers?

Patience pointed out: “Generally we define the elderly as anyone over 65. But we then have breakdowns in that bracket.”

She said there is young old, old old and very old. Young old is defined as 65-75, old old is defined as 75-85 and above 85 is very old. Like Cox, she said there were now many people living to over 100 in TT.

Globally, the group defined as senior citizens was increasing and the issue of pensions was an internationally concerning one.

Many countries were now looking at increasing the retirement age and having people work longer, but some people did not want to do so.

“It is not that you reach 60 and you have to retire any more. That is not realistic any more, because you may have another 30 years of then not working, and how are you going to survive on a limited pension? Whether that is solely a government pension, or if you happen to also be to have received or set up things through your working life to have a private pension in addition.”

The Ministry of Finance hosted consultations last year on a possible increase in the compulsory retirement age from 60 to 65.

Whatever changes are made, they are not going to be easy and will require adaptation and feasibility studies, she said.

“The sooner you start doing things, the sooner you can come up with more long-term plans to benefit the population as a whole.”

Patience said younger people needed to realise things needed to be put in place to allow them to age better. She said the current system helped the most vulnerable, but that system was not ideal, as many elderly people were not in a good financial or social position.

Finding answers for the aged

The answers to what happens with pensions needs an all-of-society approach and should not be solely up to the Government or the individual.

Patience said these conversations should have been happening already.

Attzs also believes a national conversation must take place around pensions, "so we can adequately address the issue of sustainability of the pension system and increasing the work(ing) age.

“All of these are interrelated issues, and we need to bring all of the relevant data, issues to the table so we can have a holistic conversation and implications for TT.”

Addressing the old age pension, Attzs said people used "sustainability" to mean all kinds of things.

She said the $3,500 pension was separate from pensions earned during one’s working years, and was increased under the current administration a few years ago.

All governments, she said, were prepared to find the resources to deal with ageing populations.
But, she noted, “I think that has to be linked, in some sense, to the conversation that the Government is trying to have around increasing the retirement age. I don’t think we can divorce these things.

"I think one of the reasons the Government is trying to increase the retirement age is also to ensure we have our senior citizens – who have institutional knowledge in a particular area – continue to be contributing members of the labour force.”

She agrees the topic of pensions must be addressed.

“We are relying too much on anecdotal evidence, and we need to have a conversation around the ageing population, how much of our ageing population is dependent on government pension...as opposed to pensions earned from employers, etc.”

An ageing population will bring with it increased levels of morbidity and mortality and TT would have to look at the net impact, Attzs said – and then make some determination as to whether or not it was going to put additional burden on the Government.