Thoughts on the contributory pension fund shortfall.

The Royal Gazette asked for my thoughts about the Contributory pension fund after some comments I made on twitter.  A portion of those were published in today’s paper. Here is a copy of my commentary in full.


The 2014 review of the Contributory Pension Fund predicted that in a best case scenario, the money would run out in 2049.  As a stark example, this suggests that those born in 1984 who would turn 65 in 2049 would effectively spend their entire working lives contributing to a pension system from which they would not draw a penny.  This is wholly concerning in that as our population ages and our elderly live longer, it places significant burdens on our younger working population to sustain a scheme that will be of no benefit to them.


It is worthwhile to understand that this is in relation to the social insurance fees taken off your paycheck each week of $34.47 each from you and your employer.  This does not mean your private pension which accounts for 5% of your paycheck matched with an additional 5% from your employer.  Your private pension is dependent on the management arrangements and directions you make with your pension provider.


Some changes have been made to increase contributions however at the same time, increases in pension payouts have also been made.  Both the OBA and the PLP increased contributions and payouts in the last couple years.


In order to make it more sustainable in the long run we will need to make hard choices of cutting back on pension payments, increasing the amount workers need to contribute, increasing the retirement age and finally, increasing our resident population.  None of which are very palatable for many Bermudians.  Whether any of these changes will make the pension system ultimately sustainable for future generations is uncertain.  The sad reality is that Bermuda’s population is aging and as a result of our elders living far longer than expected when this pension scheme was originally devised means that it is very likely that eventually it will run out of money without drastic measures taking place.