My department was recently challenged to find out what the public knows about Social Security, because my challenger was convinced that the public should be better informed about our operations. After my initial shock at the implied accusation of inefficiency, I wondered what it our accuser knew that you, the public, should have known but didn’t, and what it is that the department didn’t know about you. Hopefully, this week’s article will go someway to correcting that notion. Recently, persons have asked what happens to the moneys paid into Social Security By and on behalf of an immigrant if that immigrant is involuntarily repatriated. While it is true that individually money is paid into Social Security, from the moment it is received By the cashier, it no longer belongs to you, but belongs to all of us although an individual record is kept. The immigrant remains entitled to his/her benefits. However, those benefits effectively are now Age Pension, Invalidity pension, survivor benefits and funeral grant, the long term benefits that are usually activated By infirmity, age or death. These are the benefits which are supported under the CARICOM reciprocal agreement. The popular view that the repatriate is accompanied on the journey By money from Social Security is NOT true. In the interest of full disclosure, I must state that ALL short term benefits will cease once contributions cease. In other words, the returned immigrant will no longer be entitled to maternity, sickness, employment injury benefits, invalidity assistance and so on. The OECS Reciprocal arrangement proposes that they continue to access these benefits, but that proposal has not been ratified By any of the governments yet and is therefore not law. Furthermore, it does not matter whether the repatriation is voluntary or involuntary. Another question that has gained momentum in recent times is, whether we will now begin to pay pensions in the mid 50’s as of 2010. No, we have not been given any such mandate as our pensionable age remains at 62 – for now, until it climbs towards the mid 60’s! However, there are pensioners who are younger than age 62 who receive a pension. These are the “invalids”, the disabled or survivors (bereaved spouses, and a few children who are under the age of 16, sometimes 18, if still in school here). In other words, they have suffered some kind of hardship or work accident unrelated to the nature of the economy. Those persons who fall under the 55 year-rule, are well advised to prepare for retirement, By making sure their payments are in and on time, and By educating themselves on the pension rights that they have acquired, whether through the statutory system or the occupational system or both. Again, in the interest of full disclosure, as of December last year, there were 984 persons, younger than 62 who were in receipt of a pension. These were the survivors, the invalidity pensioners and the disability pensioners. As a reminder, pension points are earned at Social Security for every 50 contributions above 500, and subject to a maximum of 60 percentage points. Five hundred payments gets the individual the minimum of 30 percentage points. Thus our pension ranges from 30 % – 60% of appropriate wages. Public servants who are entitled to an occupational pension accrue pension points at the rate of 2% per year or more accurately 0.16666% per month, once the minimum conditions are met, up to a maximum of 67% of appropriate salary. Of course, some of that accrued pension points can be traded away – or reduced – for the gratuity. Thus, they have an option of a) Full pension or b) Reduced Pension with Gratuity. Most persons find the gratuity to be irresistible as it can be quite handy to settle debts or fund celebratory events. It is calculated as the difference between the full pension and the reduced pension, multiplied By a factor of 15. (For more information, study the Pension Act and the Pension Variation Act, or contact personnel from the Human Resources Department of Government). The interesting thing about this occupational pension is that it was really designed for termination at age 55, as no more accrual takes place after 400 months or 33 and a third years, assuming that one entered the service at the then age of majority of 21 years. My final reminder is that pensions are also a factor of wages earned, so that the better the wage, the better the pension, subject to any ceiling that may exist. That ceiling for Social Security is $6,500.00 per month (($78,000.00 per annum). It is that which now sets the cap on our pension at $3,900.00. For those for whom that isn’t enough, we strongly recommend private arrangements. We may be able to help, soon! Other businesses may also operate occupational pension systems. Members of such systems ought to thoroughly familiarize themselves with the mathematics involved. We may be able to help too. Do us a favour. Call our offices and let us know how much you now know!
Commentary By Elvin Bailey Pension mathematics
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