Premier: Contributions Proposal Is Not New

July 10, 2018

[Updated] “The proposal to change employer and employee contributions for the Social Insurance Plan from a fixed rate to a percentage of earnings is nothing new,” Premier David Burt said, adding that the “Opposition Leader’s statement that she has never heard of a progressive contribution into a defined benefit fund shows a clear lack of understanding on the structure of social insurance schemes worldwide.”

This follows after OBA Leader and Shadow Finance Minister Jeanne Atherden said the Premier’s plan “raises a list of serious questions which Government must urgently address.”

Ms Atherden said: “What the Premier is calling for is essentially a social welfare programme. I have never heard of a progressive contribution into a defined benefit fund.

“As usual, policy announcements by this Government lack any detail. In the absence of a clear picture of what the Premier is suggesting, we can only speculate as to where this is going,” she added.

Premier and Minister of Finance David Burt said, “The proposal to change employer and employee contributions for the Social Insurance Plan from a fixed rate to a percentage of earnings is nothing new.

“In our 2017/18 budget reply, we proposed to complete a comprehensive examination of the social insurance programme, including the impact of changing employer and employee contributions from a fixed rate to a percentage of earnings, and the appropriate level for the cap on social insurance contributions. The objective of the review will be to increase the take-home pay of low earners.

“Also in the Government’s election platform we proposed to ensure fairness in our tax structure by performing a comprehensive examination of the social insurance programme to increase the take-home pay for low-income earners.

“In keeping with our promise last week I announced that next year, in conjunction with our pledge to create a fairer tax system, Government will begin the process to change pension contributions from a flat rate to a more progressive system ensuring that our most vulnerable Bermudians will carry a lower share of the burden of sustaining our pension system.

“Also the Opposition Leader’s statement that policy announcements by this Government lack any detail is without merit,” the Premier added.

“Before any decisions are made, the Government’s actuary will conduct a comprehensive examination on the social insurance programme and make recommendations to the Government so that we can meet our objectives. This work will be performed during the 2017 actuary review of the Fund which is currently underway.

“The Opposition Leader’s statement that she has never heard of a progressive contribution into a defined benefit fund shows a clear lack of understanding on the structure of social insurance schemes worldwide.

“Very few currently have flat rate contributions. For example, the contribution rates under the Canadian Pension Plan [CPP] – Canada’s version of the Social Insurance Plan – are based on a percentage of an employee’s earnings.

“Under the CPP there is a basic salary exemption below which contributions are not paid as well as a salary cap above which contributions are not paid.

“Also under the UK State pension plan employers and employees pay National Insurance contributions depending on how much the employee earns.

“This is a Government that keeps its promises made to the people that elected us in July 2017,” Premier Burt concluded.

Update July 11, 1.28pm: Opposition Leader and Shadow Finance Minister Jeanne Atherden said, “There are so many inaccuracies and contradictions in the Premier’s two statements on the Social Insurance matter that I don’t know where to begin. He has clarified his initial position but in doing so he has raised even more questions.

“There is nothing progressive about what he is suggesting. I believe the word he was looking for is equitable.

“Changing from a fixed amount to a fixed rate [%] is one thing, but I would like to understand how does that benefit those on the lower end of the scale?

“The only thing that I can gather from the proposal to move from a fixed amount to a fixed rate [%] is that it will benefit those that make more money and who will contribute more and therefore get a greater benefit amount once they retire.

“To introduce this measure to increase the take home pay for lower income individuals helps them in the short term, but in long term this is setting them up to not have a significant amount of pension when they retire thus adding to burden of government and putting unsustainable pressure on Financial Assistance.

“The Premier needs to realize that every time he speaks on new issues he is coming up with policy decisions – we assume his MPs have also agreed to this – but one must always think and consult before they speak, especially from the office he currently holds.

“He has implied that I have not done my research in respect to his policy standpoint.

“However, if the Premier would have said in his first statement that his intention was to change the system from fixed amount to fixed rate [%] I would have accepted that, but he clearly did not, he just said contributions would be more progressive. He needs to look up what the word progressive means.

“I am glad that he has brought up the Canadian Pension Plan as I am CPA through the Canadian programme and have been for over 40 years.

“At the current time that CPP contribution is a fixed rate [%] for all individuals which requires both the employee and employer to contribute 4.95 percent of up to $55,300 [CAD] of gross wages with a basic salary exemption of $3,500 [CAD]. If fixed rates [%] for persons across the board are deemed to be ‘progressive’ by the Finance Minister, he should reflect this ‘progressive’ policy stance to Payroll Tax.”

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Comments (37)

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  1. Politricks says:

    I still don’t understand how one pays a set sum for their retirement plan, but when they retire they get less then they worked for and put in. How is that fair?

    • Infidelguy says:

      Social Insurance is not meant to be a “retirement plan”.

      “…The amount of the check (you receive) varies based on the age at which you begin receiving benefits as well as how many years you worked and the amounts you earned while you were contributing to the program. Social Security isn’t designed to fully replace your income or meet all of your financial needs in retirement.”

      Read more: Retirement Plans: Pensions vs. Social Security | Investopedia

    • Justin says:

      They can do whatever they want because people still won’t pay. History has shown they won’t do nothing about it either. I think I’ll join that bandwagon!!

    • Answer says:

      Burt is going to make that worse, not better.

  2. Truthhertz says:

    A pension contribution is a tax?

    When I pay taxes I expect no money in return.

    When I pay into my retirement fund I expect to get the amount which I saved once I retire. I don’t expect my retirement savings (not a tax) to be given to someone else.

    Progressive tax I get. But not this.

  3. Paul says:

    The Premier, needs to slow down and rethink a lot of his proposals,to much to soon always ends up F.U.

  4. Captain Confused says:

    There is NOTHING progressive about this labor party. He uses examples of Canada and the UK, but we do not even have a quarter of the population that they do to sustain a social insurance scheme such as this. The only thing this does is put more pressure on the middle class to sustain our pension, which will have an adverse effect. The middle class are the people who keep our economy running. This makes absolutely no sense.

    Also, the first question that comes to mind is if you put more in, do you receive more once you start receiving pension? Oh wait, there will be nothing left for Gen Ys. No one ever considers the future when you need the votes now.

    • sandgrownan says:

      He’s not as bright as people think he is

  5. Ringmaster says:

    The first thing that needs to go is the Government Employees Defined Benefit Plan. It is outdated, unfair and needs to go. No private sector plan is now based on final salary as it is unsustainable. Guess who pays for the Government one when it is underfunded? The private sector. Keep it separate and only Government employees pay into it. Not enough money, not enough pension.
    That’s fair.

  6. Yup!! Sounds just like oba. Owning up to absolutely NOTHING.
    All they did in the past 4 years was ALL RIGHT.
    No way!!

    • archie says:

      LOL that makes me laugh. I am not a fan of either party but you have to put this in context …. for 15 of the last 20 years the PLP has been in power. It is their policies that have got Bermuda to where they are now

      • Me says:

        So OBA gets to un-own any responsibility in this? That is effectively and indirectly what you are saying.

        • Double S says:

          Why not? Why not follow the PLP lead of shirking responsibility, except of course for any positive developments.

          And this is simple wealth distribution under the misonomer of ‘progressive.’

        • archie says:

          Of course not but you have to put things in context – the PLP has had longer to put things right/make things worse/own up to mistakes etc etc …

    • The real Terry says:

      STRAIGHTFURWARD as usual your head is up your backside someplace, it is obvious you know nothing about pensions. Mrs. Atherden is correct I have never heard of a defined benefit plan that had actuarial top ups from some unrelated source. If the premier thinks that people are going to contribute more if they earn it and still get the same benefit that someone paying less gets, he is in for a rude awaking.

  7. Justin says:

    Basically another tax on international business – the people who pay all the bills but have no rights in this country. Will this be the straw that breaks the camel’s back????

  8. frank says:

    I had a friend that died at age 64 no one in his family got any money from all the money he put in
    Now do something about that.
    And I hope he is not putting a of our money in this bs fintech or bitcoin

    • Anbu says:

      Of course thats what hes doing. Was always part of his agenda. Straight outta his mouth.

  9. Joe Bloggs says:

    This is the same rhetoric I heard 10 years ago, and the PLP Government then drove away 5,000 high paying jobs and the rents and other spending in Bermuda that went with them.

    This is a proposed form of income tax and nothing more.

  10. Mumbojumbo says:

    Whatever you do please review the communication and social iniquities presently existing in govt …particularly payroll tax…please review yesterday’s phone calls (for training purposes) ,do not hang up on general public, interrupt,talk at same time or otherwise exasperate an otherwise perturbed constituent.
    Do not argue ,malign ,nor insinuate ship .
    If a constituent wishes to speak to a supervisor or head of a department that means do just that because it has now been gone on too long and you just don’t get it.
    Supervisors and department s need individual emails to expediate issues in a time sensitive manner…especially if you invoke fines for tardiness or misunderstandings on your part.

  11. Bo Jangles says:

    Has any consideration been given to adjusting what we pay out of the pension fund as benefits? Or adjusting what the Government spends currently so as to have budget surplus for pension support? All I have seen is a willingness to take more, not spend less.

    • Answer says:

      They already committed to increasing pension payouts every year. It’s the same as Greece – spend other people’s money like it’s water, tax everyone in sight, and borrow the rest. Then let our children and grandchildren pay for the problems.

  12. Jus' Askin' says:

    Pension Plan was Flawed from the Beginning


    Social Insurance is $65 but Medical Insurance goes up regularly and will suck away any “take home” monies that will be offset by this DUMB idea :-(

    When will Bermudians realize these two parties are CLUELESS!!!

    PLP and OBA are two sides of the same coin!!!


    • Anonymous says:

      You can control your own money. Go to a financial institution and start up an investment fund. You can use that to supplement your pension once you retire. Don’t become a burden to your family.

      • Joe Bloggs says:

        What money? Government has its eye on all my money. There will be nothing left to save!

  13. archie says:

    But … this is seriously disingenuous of the Premier. Yes have a progressive amount whereby richer people pay more: but what you cannot do is have the same payment for all.

  14. Infidelguy says:

    David Burt and the PLP are going after higher wage earners. They want them to pay a higher percentage of their wages into the fund. At the moment everyone pays into the social insurance fund on a relatively equal bases.

    That’s what this is all about.

    • Joe Bloggs says:

      Yes, and I will receive the same at the end of the day too. It does not matter if I have worked hard and I have paid for my home or worked little and continue to rent. I have been paying in like everyone else for the last 34 years and I will get the same as everyone else.

      Are you suggesting I should pay more but get less because I have worked hard?

  15. redrose says:

    I am intrigued. This was a policy announcement by the Premier – yet he says he will consult and have the actuaries work on it. But … why not do that before announcing it?

    My guess is that the PLP has accomplished so little and put up so many taxes/charges in their first year that they are sweating big time and this is a sop for the party base.

    Did his own MPs OK this?

  16. Rocky5 says:

    This increase will be followed by Dividend & Rental Income Taxes, because business owners will lower their own salaries and pay out Dividends & Rents to minimize the cost of higher Social Insurance payments. Bermuda will really be priced out of the market for good & Cayman will have our lunch shortly!!

  17. alistair maclean says:

    Not quite a first anniversary but we’ve had nothing but increases from the PLP – health costs, sugar tax etc etc and this is just another one.

    All the while they spend spend spend and travel around the world for a bunch of meaningless MOUs ….

    They have put up my cost of living way beyond the tiny bit of relief they gave in the payroll tax.

    We had to deceive you? Never again will I vote PLP. never.

    • Toodle-oo says:

      *We had to deceive you? Never again will I vote PLP. never.*

      I’d love to know why you would have ever even voted for them in the first place.
      What did you think was going to change from the first 14 years ?

  18. JCS says:

    How about doing something about payroll tax for seniors? Living on a pension in this island is almost impossible so a lot of seniors go and get part time jobs to give them a little extra cash. Payroll tax has to come out of that money leaving the senior with less funds. FYI the majority of seniors do not want to go on social assistance.

    Age Concern you should be tackling this!!!!

  19. Answer says:

    The PLP is all about increasing taxes and reducing service, yet spending and borrowing more.

  20. Mumbojumbo says:

    I earned that money.
    It is mine….not this government…or the other!
    Our taxes are too high now…
    Or roads still need paving…when they are paved they don’t level them…most roads are. On an angle down on the offside.
    So why tax vehicles?
    The roads suck.