The extent to which retirement savings in Barbados has been impacted by the economic downturn is worth examining. We are often urged to prepare for the golden years, and not just rely on the National Insurance Scheme to provide a nest egg as time goes on. Yet, it is undeniable that with more expenses on their hands – and in some cases, unemployment – many low and middle-income employees do not have the same windfall as before to save extra funds, furthermore save for retirement. It is a worrying trend that must be protected against if the currently employed are to enjoy the same quality of life in latter years as they do now.
For years, there has been general concern over pensions in Barbados, specifically the state funded National Insurance Scheme. Low birth rates, a rising elderly population and less contributions to the NIS have caused worry over its health in years to come. As such, Barbadians have been encouraged to use a variety of methods, including opening their own pension plans, to supplement NIS pensions. Government has also moved to provide a cushion for existing receivers of non-contributory pensions, with a recent raise from $155 to $225 per week in light of the troubled economy.
Yet, if one was to ask the average worker if they have a pension savings, what would the response be? The advised method of pension saving is to allot at least ten per cent of one’s salary into a retirement savings plan and working backwards to estimate – based on current expenses – the level of income a person needs to maintain his or her standard of living. Some companies even have pension plans that can assist employees with their needs. However, a number of things have to be factored into that equation. For example, while registered retirement plans have a deadline date (when the person is of a certain age, say 70), there is no way of knowing how long a person will live, and as Barbadians are renowned for their longevity – and regularly attaining the age of 100 – it is more probable that retirees will live long. It therefore means that their nest egg must be able to encompass at least 30 years. In addition, there may be various health challenges in older years that necessitate paying a chunk to medical care. We also underestimate the extent to which inflation may limit the spend that would otherwise be available in the future, or fail to adequately provide for leisure activities, such as travelling.
Fortunately, experts advise that all is not lost; it is possible to start saving for retirement even if one has not previously done so, or has been inconsistent in so doing. The key is looking at one’s budget, saving an agreed upon amount and sticking to it religiously, and if that is not entirely possible right now, at least committing to a time when to start saving. Persons can also turn a hobby into a money-making venture, earning valuable income on the side that can be apportioned to retirement savings. In addition, after formal retirement persons may work longer to secure their financial future, or use existing assets like homes to sell or rent out to make more money.
The lack of discussion on this subject, however, is not helpful to those who may be too afraid to face their prospects for the future. And it is really those persons who have not made any kind of plan, who are too consumed and concerned with the challenges they are facing in the here and now, who must be advised on how best they can plan for the future.