Pension Increase Suspension Amendment
Finance Minister Bob Richards tabled the Pensions (Increase) Amendment and Suspension Act 2014 in the House of Assembly this morning [June 27], which seeks to eliminate the mandatory requirement to provide a cost of living increase for pensions paid to retired government employees, former Ministers and Members of the Legislature, and ex-gratia allowances.
Minister Richards said, “The primary purpose of this Bill is to suspend Section (2) of the Pension (Increase) Act 1972, until such time as the sustainability of the relevant plans have improved, in order to eliminate the mandatory requirement for the Minister of Finance to provide a cost of living increase for pensions paid to retired government employees, former Ministers and Members of the Legislature, and ex-gratia allowances.
“, Section 2(1) of the Pensions (Increase) Act 1972 (“the Act”) requires that the Minister of Finance shall review the rates of pensions against any rise there may have been in the cost of living during the two year review period ending 30th June.
“If in any review period the cost of living has risen by half of one percent or more, then the Minister of Finance shall by Order provide that pensions payable shall be increased in accordance with a formula set out in the Act.
“The formula calculates cost of living increases measured by the “all items” consumer price index that is published by the Government Statistics Department.
“Similarly, the Chairman of the Public Service Superannuation Board shall by Order provide that pensions payable to persons in the Public Service Superannuation Fund shall be increased in accordance with the same formula.
“A review will fall due on 1st July, 2014, but considering the significant unfunded positions of both the Ministers and Members of the Legislature Pension Fund (MMLPF) and the Public Service Superannuation Fund (PSSF) it has been determined that the cost of living adjustment (COLA) should be removed for both current and future pensioners until such time as the sustainability of the plans have improved. At this time both the PSSF and MMLPF contribution/benefit structure is not sustainable based on current and projected membership demographics.
The Minister’s full statement follows below:
Mr. Speaker, I rise today to advise Honourable Members and the general public on the Pensions (Increase) Amendment and Suspension Act 2014, a Bill that I will be tabling in this Honourable House later this morning.
The primary purpose of this Bill is to suspend Section (2) of the Pension (Increase) Act 1972, until such time as the sustainability of the relevant plans have improved, in order to eliminate the mandatory requirement for the Minister of Finance to provide a cost of living increase for pensions paid to retired government employees, former Ministers and Members of the Legislature, and ex-gratia allowances
Mr. Speaker, Section 2(1) of the Pensions (Increase) Act 1972 (“the Act”) requires that the Minister of Finance shall review the rates of pensions against any rise there may have been in the cost of living during the two year review period ending 30th June. If in any review period the cost of living has risen by half of one percent or more, then the Minister of Finance shall by Order provide that pensions payable shall be increased in accordance with a formula set out in the Act. The formula calculates cost of living increases measured by the “all items” consumer price index that is published by the Government Statistics Department. Similarly, the Chairman of the Public Service Superannuation Board shall by Order provide that pensions payable to persons in the Public Service Superannuation Fund shall be increased in accordance with the same formula.
Mr. Speaker, a review will fall due on 1st July, 2014, but considering the significant unfunded positions of both the Ministers and Members of the Legislature Pension Fund (MMLPF) and the Public Service Superannuation Fund (PSSF) it has been determined that the cost of living adjustment (COLA) should be removed for both current and future pensioners until such time as the sustainability of the plans have improved. At this time both the PSSF and MMLPF contribution/benefit structure is not sustainable based on current and projected membership demographics.
Honorable members are advised that the COLA provision adds about 23% to the PSSF and MMLPF liabilities. In terms of sustainability, this should be considered as a necessary change at this time and would impact all members. It is fair to have it affect pensioners as well as active members, as the plan was not in reality funded at the level required to fund pensioners’ benefits when they retired. Based on this recommendation, no pensioner would receive a lower pension than already being received. The Government Actuary and the SAGE Commission suggest that this change be made as soon as possible, freezing all pensions in pay at current levels. This is not a change that should be phased in.
Mr. Speaker, the Ministry of Finance and the Pension and Benefits Working Group formed under the Public Sector Reform initiative are in support of this recommendation which is in line with changes being made in the private sector, where private sector employers still offer Defined Benefit pension plans and the direction that public sector plans are heading.
It should be noted that if other benefit changes are introduced to the Plans it may be possible to restore some degree of indexation to all pensioners in the future, depending on how the funded position of the MMLPF and the PSSF and its long term financial viability improves.
Mr. Speaker, demographic effects are having an impact on the sustainability of pension schemes worldwide. It’s good news that we’re generally living longer and healthier lives, and spending longer in education and training. But this is making pensions more costly as we have to pay them for longer on the basis of shorter working lives.
In both the private and public sectors, employers need to take steps to keep costs manageable for the long-term. This action is just one step being taken to improve the sustainability of the PSSF and MMLPF.
Mr. Speaker, Honourable Members and the general public should note that there is no simple remedy to resolve the unfunded positions of the public sector pension plans. To assist with the review of these pension plans, a Pension and Benefits Working Group (PBWG) has been established. The purpose of the PBWG is to review, under the Public Sector Reform Initiative, all public sector pension plans, and make recommendations to Cabinet in order to ensure the sustainability of these plans and benefits in a manner that is responsible and fair to both the pensioners and members of the plans and Bermuda taxpayers.
Some of the benefit changes to be considered for the PSSF are as follows:
- Change the final average earnings (“FAE”) definition from “the salary payable to him immediately preceding the date of his retirement” to an average of his earnings over the five years preceding his date of retirement (or termination).
- Increase the age at which an unreduced pension is payable from 60 to 65 (55 to 60 for special groups).
- Apply actuarial reductions on early retirement prior to age 65 (60).
Mr. Speaker, benefit design changes will also be considered for the MMLPF.
Mr. Speaker, in closing, I wish to assure current and future pensioners and the general Bermuda population that the Government is sensitive to the challenges facing pension plans of this nature and will continue to monitor the financial position of the Funds to ensure that the Funds remains viable in the long-term. The Ministry will formulate funding policies in a manner which is responsible and fair to both the PSSF’s and MMLPF’s pensioners and Bermuda’s tax payers.
Thank you, Mr. Speaker
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Articles that link to this one:
- PLP: “Pension Freeze Is An Unacceptable Move” | Bernews.com | June 30, 2014
- Ministry Clarifies Pension Increase Suspension | Bernews.com | July 1, 2014
The COLA adjustments went to all of those rocks at the L.F. Wade Airport that the PLP and Island Construction purchased for Bermuda. I was so proud to be a Bermudian – we had so much money we could by rocks by the ship load.
Promises will be broken – get ready people – here they come.
It’s painful and it sucks – but I am glad to meet a politician who is facing the grim realities rather than punting them down the road a bit more.
who made the promises
this is BS. Yes we are all in financially challenging periods, but to make those that are retired take the fall is ridiculous. Retired government workers worked HARD for their country for decades.
But the wealthy OBA, especially Messrs Dunkley and Richards would not care about the retired working class.
..and there off. Each step the OBA takes to get us out of this miserable debt situation the PLP will cause those very same people to scream the loudest. What are we all supposed to do? Not make any cuts and sit back and wait until the IMF come in? This is going to be fun. If the Gov reduces pensions, they’ll scream, reduces benefits, they’ll scream, reduced head count, they’ll scream, health care coverage, sick days, pay, scream, scream, scream. Poor me! Well pray do tell where all this $ is supposed to come from because thanks to the PLP we’re broke. Why aren’t people screaming about what they did?
I would suggest cutting Ministerial Pay from 168K before cutting from our seniors. If each Minister cut their ministerial portion from 110K to 75K they would still make 120K which is more than most make.
Please do some basic elementary school arithmetic and explain to me how saving 35k per minister could even come close to plugging the holes in our pension funds?????
LOL !! Exactly. Some people have no sense of the magnitude of debt that we are in nor how deep the hole we have to climb out of. Cutting Ministers salaries will do nothing. It would be like throwing pebbles in the grand canyon in an effort to fill it up.
The idea of pension payments being increased in line with Cost of Living is optimistic at best. Where is that money supposed to come from if the fund is under-performing ?! The actuarial projections (if they performed any at all when that was agreed) I am sure, did not contemplate the financial collapse of 2008 and the seemingly non-existent recovery. This is basic math people. Hard decisions have to be made and we needs adults to make them. This is the inevitable “chickens coming home to roost” part of the “spending like drunken sailors” story.
Get used to it because more is needed and there is more to come. If you don’t like it, don’t vote the PLP back in again because they are single handedly responsible for the mess that necessitates tough decisions like this one.
Getting rid of the cost of living increase is not going to fix anything. Because if retirees find that their pension funds are not covering their needs, they will have to apply to Financial Assistance for extra help. Already today the majority of people on FA are pensioners. So Government will be forced to allocate more funds in that direction. It’s robbing Peter to pay Paul, in a manner of speaking.
And the underfunding of pensions has little to do with spending like drunken sailors. It has been underfunded for many, many years, and the system was not really set up with a great deal of foresight to begin with.
Portia, multiply the number of pensioners monthly payments by 3% every year. Then contemplate the fact that new pensioners join those ranks every year and you start to get a glimpse of the financial obligation a previous Govt agreed to. It’s not sustainable. The reason why it would help the Govt today is because Financial Assistance is at the Govts discretion. The cost of living payments currently are obligatory.
Lastly, the underfunded pension is directly related to overspending. And certainly, the decision of the PLP to suspend payments to the fund (because we were broke) exacerbated the situation
Honestly sir ministers must take some type of cut u c$#&. U people r so selfish. We as workers take the responsibility every year evry time u idiot ministers #*#* up. All u ministers do us *#*@ up the money. SO U PAY THE PRICE FOR ONCE u inconsiderate idiot a#@h+?#*s. Cost of living is burning us too. N pension money is ours anyway its what we are due
So all the ex ministers and legal folks will be on foodstamps?????
Tree wrong barking up the…. Please rearrange.
simple solutions from simple minds.
All the money lost on Grand Atlantic, Berkley, Olympic swiming pool and the list goes on…would have come in really handy right now to help out those very senior, no?
i just wish that the PLP had done the sqme thing to try and reel in this pension situation their second year in office because we’d all be in a much better place. Unfortunately people aren’t going to understand how bad things are until it hits them in their own pocket which is so very sad
Exactly; the defined benefit pension model has been broken for a long time and we have to at least start with some type of fix now (as the Minister is attempting) or we can simply continue to bury our heads in the sand until the bomb explodes in our faces and there is nothing left for anyone who is under the age of 40 now.
Make no mistake, if a realist were making the decision today (instead of a politician), it wouldn’t just be an inflation freeze that we are facing, it would be a 5% per annum reduction each year going forward. Minister Richards is actually delivering the best possible news that future Bermuda Government pension recipients could possibly hope to hear.
Dunkley and Richards didn’t cause this problem Cox and Brown did. Are you saying they are not wealthy? Do you think for one minute they really gave a hoot about anyone else’s pension but their own. Wasn’t Paula accused of delaying the election until her pension plan had vested. Make sure you direct your anger to the right “wealthy” people
key word “accused”
Many of us have taken pay CUTS. And you suggest we pay more out of our shrinking pay checks so that retired government workers and MP’s can get a pay RAISE?
Are you serious?
Hard working GOV workers? LMAO! There are few out there I agree but sadly , most do not fall into that category.
It is such a surprise to see W&E workers actually doing something they now have signs in the road saying “caution men working” to warn the public so they are not startled and distracted when riding and driving.
So let me get this right Mr. Richards . . .my parents who have worked all of their lives, paid their debts to society as law abiding citizens, made their contributions to the scheme which is mandatory are now being told that they will not get the cost of living increase to their pension which they have earned?????????????????
You have lost your rabbit A** mind!!! Not only is the government making it hard for the average man and woman, now they want to take it to hit the seniors!!!!
Can we please call a vote of no confidence on this government and it’s S!!!!!!!!!!!!!!!
Where were you when the PLP stopped paying into the fund for a year ?
So please suggest a way to pay for all this. If you read the article it states that the pensions are unfunded (a.k.a. broke). Instead of eliminating the COLA they could double it or triple it for your parents and then guess what???? they would still be unfunded. All that is being done here is eliminate the illusion of the COLA that retirees weren’t going to get to begin with.
Now please explain in all your wisdom how a change in government would result in something different.
Ignorance is bliss!
Defined benefit should be scrapped and defined contribution introduced Now.
Also Ex ministers get a static or reducing pension overtime until it falls in line with the defined contribtion calculated pension.
If you’re a retired civil servant or are soon to retire, your benefits are far greater than the rest can ever dream of getting but if you’re a 30-40 year old civil servant…..there will not be any $ left when you retire. Tough luck? That’s why this needs to change…
Exactly
Wow Minister Richards! That was extemely kind of you. I would have done away with the pensions all together!
For those of you who are complaining, perhaps you can pool your resources to cover the COLA. And just so we’re clear, the COLA is green, but not quite as green as that cool-aid you just can’t get enough of!
it is probably coming!
WHY ARE WE IN CHALLENGING TIMES?
WHO PUT US IN THE POSITION OF HAVING A TEN BILLION DOLLAR UNDERFUNDED CIVIL SERVICE SUPERANNUATION FUND?
WHO PUT US IN THE POSITION OF HAVING TWO BILLION DOLLAR UNDERFUNDED PARLIAMENTARY PENSION?
This is a surgeons reaction to stopping the bleeding this country was INFLICTED with.
Perhaps your mercies to the PRIVILEGED in the PLP who scurried away with our countries millions. After all, thy were ENTITLED to it.
Don’t know why folks dislike the above, its hits the nail on the head.
WAKE UP CALL…this and all the other cuts, and they’re coming, are directly because of the PLP so they’re the ones you should be angry at. And very angry at too, because they deserve it for what they’ve done to all of us, especially to our seniors
WAKE UP CALL #2 Our pension funds are currently underfunded (not able to pay) by almost $2 Billion now and growing. Everywhere else in the world pension plans were changed from defined benefit to defined contribution because the cost of those type of plans are unsustainable. Everywhere, except in the Bermuda Government. That’s why they have to do this because already now in like 11 years there will not be any cash left to pay pensions. If are right to be angry about this because the Governments have known about this problem for years and did nothing. Just make sure your anger and frustration is directed at the right people.
WAKE UP CALL #3 All those foreigners and those foreign companies that were driven out of here over the last decade are no longer here to contribute to our economy or to pay taxes and health insurance, so no not only do we all have to pay down the massive debt and fund our pension plans, without all those damn foreigners, we now have even less $ to do that with now than they had when all that debt was created. So those two scenarios added together will meant tough times for all of us going forward. If you’re going to get mad and want to blame someone, why not ask Paula Cox what her pension benefits look like?
This is totally down to the plp and their family n friends only agenda which saw many getting fat whilst the rest got thin.
Whats the difference between Marthas Vineyard and East Devonshire Bay.
Beyoncé is coming.
lol,
well done wealthy whites
Why do you assume some of us are a) white and b) wealthy? Why aren’t you saying “I hate the PLP for causing all this mess?”
It’s going to be one for ‘Well I never’; all those seniors running to the polls to get rid of this anti-Bermudian one term UBP/oba government. What’s next cut in the educational fund; pay cuts for government workers; close down the 10% supermarket discount before the supermarkets themselves agree to it; who are this government’s next victims? Oh I know the unborn.
Alvin, your precious PLP spent or wasted more money than anyone (remember still $800 million unaccounted for). However, we have nothing to show for it.
Did the education system improve? No.
Infrastructure? No.
Tourism? No
Employment? No
International Business? No
So Alvin, before you kick and scream about why we have no money and blame the OBA? The next time you are at dinner with your buddies or in the Green Room, ask them – where did the money go!
What would you suggest Alvin? Your party oversaw this mess leaving retirees with a $2,000,000,000 underfunded pension scheme – not to mention tremendous debt and hundreds of millions in annual deficits which the unborn will be saddled with thereby depriving them of future opportunities for decades to come. What are your thoughts on that? Will your party accept any blame for disadvantaging our youth or are they too busy wandering around mindlessly muttering to themselves?
Where are the PLP solutions to the problems they alone created? It’s amazing how the hypocritical party faithful complain about the methods needed to clean up their own party’s numerous messes which confirms the significant intelligence vacuum at the top. The PLP just don’t have the necessary fiscal understanding to run the economy. The numbers speak for themselves.
Mind you, the PLP definitely know how to spend other people’s money (particularly if they can direct it towards their own party faithful via no bid contracts, jobs for the boys or excessive capital overruns) but when it comes to turning down the tap their hands are too busy scratching their heads in bewilderment.
PLP – betraying Bermudians and putting the party before the country since 1998; one undereducated, underemployed debt ridden voter at a time.
Alvin while you are moaning about the OBA being anti Bermudian, please remember that the Pot Loving Party elected an American to be their leader. After inflicting untold damage on Bermuda he has now returned home.
So if you want to talk anti Bermudian – let’s start there.
Alvin, your beloved PLP caused this through their incompetence. Voting them back in so they can finish their destruction says a lot about your level of understanding or lack thereof. Geez
Do you think in three years we will still be complaining that the PLP did this and did that. People should not be misdirected on this website but for some reason it seems to happen often. I can blame the PLP till the cows come home but what will the crying do leave you in despair. Move on will you all.
“Do you think in three years we will still be complaining that the PLP did this and did that(?)”
Yes, my unborn children will feel it. When will people realize that what a government party does in its time will ripple throughout decades. They don’t just get voted out and it ends. Is it that difficult of a concept to understand?
In fact, yes I will blame them! They took a booming economy, and destroyed it.
You tell me what they improved?
Education, Economy, Race Relations, Employment, Tourism, infrastructure, health, what, what , what did they do to improve Bermuda. Where did the money go? You must either be misled or a benefactor?!
Because most realise that they have yet to pay for their mistakes. All in time.
Those moaning about the end of COLA have certainly missed the point! The central concern should be with pensions $2Billion underfunded,will those under 50 currently paying in,receive little or ANY pension–EVER! And stop the political blame game! Those pensions were underfunded from their UBP beginning and each subsequent Govt has done the same!
Correct, but the difference is that back then the govt. was not in 2 bill debt and could have covered any underfunding without a problem. Now that is not possible.
Gee, I remember reading an article earlier this week about a couple that stole loads of money from government then left! Bad PLP! Oops! Expatriates!!!!
if u have any money in the bank…remove it, cause you WILL lose it…if you think not then leave yours there…not too far in the distant future this WILL happen. YOU have been warned.
in order for us to bob our heads back above water and breath healthy air once more we need roughly 30 pallets of brand new 100 dollar bills stacked 4′high x4′wide…
How Much is a Billion Dollars?
It is difficult to visualize just how many dollars there are in $1 billion. The politicians who are spending fortunes in government money make it sound as though they are dealing in smaller numbers by removing quite a few digits. For example, Bush’s budget deficit, which at the time of this writing is $422,000,000,000 is more simply stated as $422 billion.
To put it in a different perspective, a billion is a thousand million.
To place it in a better perspective, a billion seconds ago, it was the year 1959.
Humans first learned to write 252 billion seconds ago.
A billion minutes ago, Jesus was alive.
A billion hours ago, our ancestors were living in the Stone Age.
A billion dollars ago was only 8 hours and 20 minutes, at the rate Washington spends it.
So how did we get 2.5 billion or probably more in debt.
That’s an easy one to answer. By one incompetant decision after another…to quote one our former leaders Burch who publically said ” Budgets? We dont’t have budgets…..” And of course, “We don’t care what you think”……well Bermuda, we’re all stuck having us to pay for this now. Hurts don’t it. It boggles the mind when people say we can’t wait until the PLP get back into power….why? So they can finish the great job they started.
Remember ! seniors have been around, we have to make do chicken soup.
Seniors will just spend less.
Seniors will walk around in old shoes and old clothes.
Seniors will dress as homeless people.
Seniors will eat less or go hungry.
Seniors will get ready for hard times.
Seniors will The men will not shave or get a hair cut.
Seniors will not be able to heat or cool their homes.
Seniors will not be able to pay their medical bills.
Seniors will …………………………………
The Government retired their seniors at 65, many could have done another 5 years .
Another Government blunder.
Governments need to get its game on, not take the easy way out! What is~~ Your Plan!~~ to Re – build this economy ?
What good does it do kicking your seniors in the pants.
Our Seniors built this island.
~~o0o~~
When we build ,let us think that we build for ever.
Let it not be for present delight no present use alone. let it be such work as our descendants will thank us for ; and let us think, as we lay stone on stone, that a time is to come when those stones will be held sacred because our hands have touched them, and that men will say, as they look upon the labor and wrought substance of them.
” See! This our father did for us.
~~~~~000~~~~~~
Many in the private sector, Bermuda local companies, stopped having a cost of living increase many years ago. We also have had our defined benefit pension plans replaced by defined contribution plans. Government employees are still much better off than those in the private sector where benefit cuts are always under review and more will be coming. It’s economic reality. Sad but true. Government workers are still doing better than the private sector.
Snoopy, great comment but I dont think the average person really truly understand how much more civil servants get when they retire compared to the rest of us. It’s actually nothing short of an insult to the rest us paying for all this through our taxes. I for ine have no patience to listen to any “poor them” stories…it’s really “poor us, the taxpayer”
70 years ago the ” Forty Thieves” a derogatory name given to those business people who gave up their time and effort on Thursday afternoons without remuneration to legislate our future .
The Forty, represented a large percentage of the ruling Government at the time, some if not most of our laws and policies came from that era , at that time the Government of the day was able to manage the island without Taxation.
We had the Lighthouse and the Aquarium to generate income for the country, that’s it, even to this day.
They prided themselves in being able to create an Income Tax free state because they did not want them selves to be subject to income tax, that, which is the norm for many other countries.
However, Import Duty was their brilliant idea to have the working man, foot the bill, look around you, virtually everything you see, you pay taxes on, to keep up with the times the tax burden also increases, now we have payroll tax another burden for the working man.
At the rate we are going it will take decades for this island to get out of debt.
Taxation will not do it.
The powers that be, need to generate alternate sources of foreign income .
Bermuda’s in-house trading does not generate income and neither does penny pinching the seniors, which for them creates further hardship.
May I suggest a Lottery with multiple winnings to start with, they can tax that.
Politicians SHOULD take a REAL pay cut….yes, I agree it might not equate to much as compared to the national debt….BUT something is better than nothing……For those that are in agreement with this…I hope you sing the same tune when its time for YOU to collect your pension……Our seniors helped path the way…we have GOT to do BETTER when it comes to their care…….
Why don’t you call Paula or Ewart and ask them to donate some of their pensions because they did such a damn good job managing our economy???
Why don’t YOU call them since you came up with the idea….If you’re not a senior citizen now you will be one day so it’s no sense harboring on what was….you need to focus on what is and what will be…..can’t get back the past…rehashing is not going to fix the problem…
no but making the cut required will. ask yourself this would the PLP make those cut? You and I know the answer its no. Which shows the PLP is only about the power. The PLP grew the civil service making those in it dependent which ment votes, they promised free this free that suppose to be for everyone. Then it became means tested (a ubp plan) people do not scream and sout they said and I quote from a plp supporter who said “we knew those promisses could not be kept” (fooling you own people is that like misleading them aka telling us lies. Infact all those things the PLP supporters are crin about now are in fact the same things the PLP are guilty of and not any of those same supporters had anything to say except the plp made some mistakes or that they did not agree with everything but those lines where just that cause none of them could explain what the PLP did they did not agree with a sure sign that no matter what the PLP could do no wrong in their eyes and the line was just to pretend that they where objective thinkers when in fact…. And before some PLP joker mouth peice that posts on here tries to discredit what I’ve typed ask them the same questions see what answers they give
I am of the opinion that some body does not knows how to balance the books , there are times when we have to look in the mirror and reflect on the potential ramifications of a bad decision.
There are two area’s and there are more, that should be trimmed before taking it out on our seniors try Warwick camp and Westgate.
Peter pay Paul mentality will not work ,Peter had no vision Peter does not manage his money. Peter put his foot in it !
Did Peter’s “Seeds fall on stony ground ” ?
So the Goverment is still “BORROWING” $276Million dollars per year for these folks to live on.Besides the “HUGE DEBT” in the “BILLIONS” at only
$10 to $12Million interest per “MONTH”
And you want an increase and cheap Groceries !!!!!
HA HA HA HA HA HA! you really are living in LA LA LAND.
When our ecconomy “CRASHES” then you will have something to complain about.So be thankfull for what you have.
Agreed they should also take monies from the BTA surely all 26 million is not needed SMDH