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Raffique Shah


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Truly a national insurance ‘scheme’

By Raffique Shah
Oct 10, 2010

Not surprisingly, many Clico and CIB depositors were not excited over my column of last week. I thought I was being generous to those whose savings now seem to be “jumping up in steelband”. I referred to them as thrifty people. And I, too, would be ticked off if my savings, as small as they are, were threatened through the manipulations of corporate bandits.

I need add that in my years dealing with Clico officials, I have found most of them to be pleasant people. Bear in mind this company was the title sponsor of the local marathon, one of my pet projects, for more than a decade. They were mostly polite, and generous to a fault. I write with authority, as one who gave birth to, and oversaw this event for around 25 years. Sponsors can be crude, and at times, cruel. The organisers run into a bind, through no fault of theirs, and the sponsors simply refuse to breach the financial gap. That can lead to embarrassing situations.

I never encountered such situation with Clico. In fact, I should publicly thank those who made it happen, now that the insurance giant has withdrawn its sponsorship—understandably so. I do not for one moment believe any of them is guilty of foisting on customers a toxic product that stank from the start.

What the hell is a Single Premium Immediate Annuity? Here’s how Clico marketed it: “…life expectancy has lengthened considerably with people living well past their retirement age. This introduces a new risk—outliving your savings. An immediate annuity protects against this.

CLICO’s Single Premium Immediate Annuity guarantees you a lifetime income after retirement, all for a single lump-sum premium investment.”

Clico also promised: “Guaranteed income for the rest of your life; several income payment options in Single and Joint Life plans; and (it) can be used to consolidate an inheritance or windfall into guaranteed income that cannot be outlived.”

Just looking at these “honeyed” projections and promises, they sound too good to be true. So why did so many supposedly intelligent people fall for it? More than that, why did the regulating authority allow the company to market a product that smelled to high heavens…or maybe stank like Hell in decay? I suppose the inquiry the Government intends to pursue may unearth some, if not all, of the facts surrounding this costly misadventure. I do have my reservations, though. So many commissions have gone before, so few reports have been made public, and I don’t know of anyone who has been brought to book based on their findings.

I did promise to address another fancy-footwork financial web that has brought tears to the eyes of too many people. I refer here to the National Insurance Scheme (NIS). I think the operative word here is “scheme”. Let me, again as a layman, explain how contributors suffer from the side-effects of this State-owned and operated scheme.

First, it’s compulsory. Once a person is employed, the employer deducts NIS contributions from his wages or salary. The employer matches it with some additional funds, and pays the total to the NIB. True, the contributions are not big. But because it’s compulsory, the monthly sum paid to the NIB must be huge.

So the NIB collects billions of dollars a year. It invests these in savings, venture capital, and, as we found out recently, even “schemes” like CIB high-interest deposits. The NIB also lends the collected “dues” to corporate clients and through mortgages, earning interest. In 2009, for example, the NIB received $2.55 billion in contributions from around 500,000 employees. One can safely assume that these numbers were steady for the past decade. Its asset base stood at $17.4 billion.

Long-term beneficiaries (presumably pensioners or incapacitated employees) amounted to just over 100,000. The NIS lists 23 benefits, from sickness to pension to death. Last year, following an increase in pension payment to $2,000 a month ($1,000 less than the non-contributory old age pension current payment), the NIB paid out marginally over $2 billion. Bear in mind that sum includes other payments—like sick and death benefits.

To cut a long story short, someone must explain why those who contributed to a compulsory, Government-controlled scheme receive pensions less than those who may never have contributed anything throughout their lives. Even worse, should a person pay well beyond the number of contributions required for pension-qualification, there are no additional benefits.

It gets “wuss dan dat”, as Trinis would say. You contribute all your life, never marry, and die just before you retire. Your siblings or aged parents have nothing to get except a paltry sum to put your corpse down under. Add this many persons who work on a sporadic basis, but who contribute when they do; often, they never get any benefits from the NIB. And when a pensioner dies, his spouse gets a lousy $800 a month. This sucks!

There are many other mini-scams that have permeated the NIS, too numerous to list here. While Calder Hart was chairman up to a few months ago, these scams occurred before his tenure, and continue to this day. “Wuss dan dat”, several trade unionists have served on the NIB Board ever since it came into existence. What have they done to bring some justice to those who laboured all their lives, but who suffer in misery in their winter years?

Answer, comrades, answer!

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