Video: Premier On Retirement Age & Pensions
Pension reform is likely to involve a “gradual increase of the retirement age” as we “have to make our pension funds sustainable,” Premier David Burt said, saying that reform will “extend the life of the fund out from where it’s projected now to run out of money in 2049.”
Premier Burt, who also serves as Minister of Finance, recently sat down with Bernews for a live interview on a wide range of topics, with pension reform one of the matters discussed.
The Premier’s comments follow after the recently released Auditor General’s report noted that a review indicated that under the current system the pension fund could be “exhausted in 2049″.
Auditor General’s Report: Pension Fund.
The report said the Contributory Pension Fund [CPF] provides pensions, disability and death benefits, and noted that the governing legislation for the CPF does not require the Consolidated Fund to provide for any shortfall if the CPF has insufficient funds.
“Since the CPF cannot rely on the Consolidated Fund to meet its pension obligations, it is essential that the CPF is well managed,” the report said, noting the SAGE Commission “concluded that the-then current contributions were insufficient to allow the CPF to survive for the foreseeable future, under the current long-term assumptions.
“It also found that demographic projections regarding expected lifespans of pensioners [aged 65 and over] were not current and so did not reflect the increased lifespans experienced in many of the OECD countries that had resulted in retirement ages being increased over time to 68 and beyond.
“The Commission recommended that the-then current annual increase in the contribution rate of 1.75% per year above any benefit increase rate be changed to an increase in contribution rates of at least 3% above any benefit increase for a number of years. In addition, it recommended the establishment of a specific strategy to increase the retirement age for the CPF to 68 consistent with other OECD countries.
The report noted that subsequent to the SAGE Commission report, an actuarial review as at was carried out by Canadian company Morneau Shepell which presented the financial status of the CPF and provided projections of the CPF for the next 50 years to 2064.
“The review’s main findings and projection results were: The CPF was projected to increase gradually until 2021 then decline steadily until it was exhausted in 2049 under the best estimate scenario.
“The total outflow [including Old Age Pension benefits, other benefits, and administration and investment costs] were projected to exceed contribution income throughout the projection period.
“By the year 2064, contribution income would need to be about 1.25 times the current level in real terms in order to match the increased benefit outflow. This would require contributions to be increased by about 2.4% a year more than benefit increases over the next 50 years
“If the contributing population was increased by 10% from 2014 and sustained at these levels thereafter, this was expected to extend the life of the CPF for the entire projection period. For a 10% decrease in the number of contributors, the CPF would run out 6 years earlier.
“An increase in the retirement age to 67 over a 5 year period ending 2023, all else unchanged, could also result in a sustainable CPF over the projection period.”
Premier’s Comments
Asked about increasing the retirement age, the Premier told Bernews, “It’s something that we will have to do. It’s recommendations that have come, and it’s a question of how we’re going to be implementing that, but what I would say is that implementation of pension reform will happen in this next Parliamentary session.
‘Gradual Increase Of The Retirement Age’
“The Ministry of Finance has a lot of data. The pension and benefits working group has been working back and forth,” the Premier said.
“So the two things that we will see in addition to the cost of living measure, which I mentioned, is that we will see the issue of pension reform, with the issue with tax reform, and also the issue of social insurance reform, which will mean a gradual increase of the retirement age, both for the public service and also for receipt of social insurance benefits.”
“It will be phased in, it will be something that will be subject to consultation,” the Premier added.
’We Have To Make Our Pension Funds Sustainable’
“At the end of the day, the facts are that we have to make our pension funds sustainable,” Premier Burt said. “And there’s only two ways to do that; increase the amount of money that goes into the fund or decrease the amount of money that comes out of the fund.
“There are no other magic tricks with that,” Premier Burt added. “So it either needs to be one, the other, or a combination of both. And so what we will do on the social insurance side, is that we will find a way to increase contributions, which will not impact the lowest earners.
“We will find a way to make sure that we can continue to pay benefits, but we’re going to have to reduce the amount of benefits that are paid and the way to do that is by gradually increasing the retirement age, and with that we’ll extend the life of the fund out from where it’s projected now to run out of money in 2049.
Best Way To Fix Issue Is ‘Economic Growth’
“Those are the issues of which we have to deal with in our economy,” Premier Burt added, “But I think that one of the best fixes to those particular issues is to make sure that we have economic growth that creates additional jobs in the economy.”
Video excerpt showing the Premier discussing pension reform:
The video above was extracted from the full interview, in which Premier Burt discussed a wide range of topics including the Government’s finances, employment numbers, the retirement age, a living wage, sex offender registry, Grand Atlantic, the Shelly Bay proposal and more.
We will post additional excerpts from the interview, and to watch the full 36-minute live interview replay, please click here. and if you want to listen ‘on the go’, you can also access an audio-only version of the full interview in the podcast section of the Bernews app.
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There should be a project or plan like the sugar tax, that would dedicate funds to the pension fund!
A greater effort should be made to ensure that people are actually paying into their pension. Their is nobody policing it. I can tell you that based on my personal conversations with people, many small business owners, and self employed persons pay in cash or partially in cash to avoid paying what they should in payroll tax and pension. so when pension time comes, those of us that have paid will be expected to pay for those seniors that didn’t. many don’t pay medical either…until someone gets hurt.
Not to worry, we the people have the option to save our Pension, by voting the PLP out, and putting in the people that can run the country.
Premier Burt is ignoring the larger elephant and that is the Civil Service Pension Fund. That fund will likely run out of money quicker as defined benefits are unsustainable. Then the Consolidated Fund will need to be raided to support it, and the dominoes will fall.
I get what the Premier is saying, but there’s an important distinction that I think the Government is overlooking here. When he talks about raising the retirement age, he is talking only about raising the age at which you can begin to collect your Government old age pension (so, say they will raise it from 65 to 68). But in most businesses, the policy is that you are expected to retire at 65, unless you are a key staff member. It is entirely up to the company’s discretion as to whether they keep you on. So the actual “retirement age” (i.e. when you are expected to leave the job) will still be 65.
This creates a major problem as seniors will be leaving a job at 65 but unable to receive an old-age pension to supplement their income until they are 68. Yes, there is still the pension saved from working at the company, through contributions which the worker (hopefully) has paid into, but this is not designed to replace 100% of your income. To meet the shortfall, and due to the difficulties of getting hired at another job in your 60s, many seniors will be forced to seek Financial Assistance. This will not save Government money. You are simply robbing Peter to pay Paul.
The only way to avoid this problem would be if Government legislated that a business cannot force a person to retire before 68. Yet there is no mention of this. When the Human Rights Act was amended in 2013 the Government refused to add “age” as a category which could not be discriminated against, for this very reason, because it would force companies to stop retiring people at 65. Raising the retirement age (for receiving Government pensions) without considering this could leave many older workers in a very bad situation.
Then what happens to the younger generation trying to get jobs, but can’t because people are working longer?
A double edged sword really.
I am so fed up with the PLP, we are in debt !!!!!!! and this government seems to think we need to spend more money… to think we gave 70k to somerset cricket club !!!! and what was that all about ? and now we are going to put money into the horrible grant atlantic fiasco…. ( thanks to Ewart Brown.)
At which point you can expect a class action law suit!
Good luck
He didn’t mention this during the election. I thought this guy was supposed to be “brilliant”. Turns out he’s a loser.
There you go. The people get what they voted for. Too bad those who did not vote for them get saddled with the ineptitude as well. The brain drain & general flight out of Bermuda will continue. The jewel of the Atlantic no more.
This is just great news now isn’t it !!! So what happens to someone that has paid their whole life to find out at 65 you cannot have your pension until you 68. WOW unbelievable. They had no right dipping it to money that was rightfully not theirs to take. Pathetic bunch glad I did not vote for them. Yet I will feel the effects of the situation.
What the heck? Why do I have to work more years when I should be enjoying retirement. Working people to the grave….
PLP took a pension fund holiday, not contributing to the pension fund and using that money for spending, so why should we have to pay for the PLP stupidity.
This really annoys me. There is only one logical approach to solving our inevitable pension problem and that is growing the tax base .i know that is antithetical to how the Plp campaigned but for crying out loud to not try to achieve population growth is completely socially irresponsible. If protectionism worked our economy wouldn’t have shrunk so much when the previous Plp government introduced term limits for foreign workers. We cannot afford to forget this fact. If Burt genuinely wants to have a positive lasting legacy he should abandon the “ us and them “ politics that works for elections but is disastrous for the economy.
retro.. This is exactly what I said would happen when the plp implemented the “term limits”. Increasing the the retirement are isn’t the answer!! We need more (young) people paying into the pension fund. In many countries they are reducing the retirement age to free up jobs for those young people to fill…
It ain’t rocket science!
This will not come close to resolving the pension fund issue. He needs to show real courage and get rid of defined benefit plans in government and civil service.
If only there was someway to have more people paying into the system – some sort of affluent group of people that want to live and contribute to the island and make lives here on a permanent basis…
Wonder how that immigration reform thingy is coming along? How would anyone know?
What happens to those who turn 65 and are eligible for land tax exemption when living in the main residence? If that age boundary jumps to 68 , it seems so unfair to those who have sensibly planned their financial future.
No wonder there is a brain drain of young, middle age and retired Bermudians.
Lest we forget that most of us have always invested our heart, soul and finances into our island community.
Be prepared for a further exodus of those contributing to our tax base.
Yes, I would like my government pension, but the plans for this to be guaranteed must not be planned overnight!
What PLP is basically saying is that we will have to to work longer to pay more in, sacrificing 3 years of our lives AND get 3 years less money out of the pension, so it is a double whammy !! We pay in for three more years and get don’t get any pension for three years. 6 years of without!!
Also by people not retiring from jobs, it takes away the opportunities of those looking for work. So three years worth of work seeking young adults having no jobs to go into. So our children and grandchildren will suffer.
Time to march.