A report put together by the International Labour Organisation (ILO) is projecting the Social Security and National Insurance Trust’s (SSNIT) reserves to hit zero by 2036.
The gloomy report suggests that the woes of beneficiaries will begin by 2029 when contributions, investment income and other income will begin to decrease and will no longer be sufficient to service the Trust’s annual expenditures.
The actuarial valuation of the report also disclosed that “total expenditures as a percentage of insurable earnings (which is called the pay-as-you-go (PAYG) rate) rises from 11.5 percent in 2021 to 29.5 percent in 2095. The PAYG rate represents the contribution rate that would be required to pay all the expenditures of the scheme (benefits, administrative and other expenses), year after year, in the absence of a reserve.
“This high increase in the PAYG rate is mainly due to the increase in the demographic ratio, as explained in the previous section. In fact, there are more and more pensioners receiving benefits, while the number of contributors is not growing as fast.”
Other key findings of the report;
- Annual contributions are insufficient to pay for all annual expenditures (benefits and administrative expenditures) throughout the projection period.
- Investment income must be used to pay for annual expenditures. The reserve grows until 2028..
- Starting in 2029, total income (contributions, investment income and other income) is no longer sufficient to pay for annual expenditures. The reserve starts to decrease.
- During the year 2036, the reserve drops to zero.
- Starting in 2036, the required annual contribution rate to pay for all expenditures becomes the PAYG rate. As an illustration, this rate is 12.4 per cent in 2036 and 29.5 per cent in 2095.
- The reserve ratio, which is the ratio of the end-of-year reserve over the annual expenditures for the year, moves from 3.4 to 0 between 2021 and 2036. This ratio can be interpreted as the number of years during which annual expenditures could be paid by the reserve if there were no contributions, no investment income and no other income.
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