Future pensioners may face
hard times, according to an economist.
By Tim Smith Future seniors face abject
poverty unless Santa Claus bails them out because there’s so little in Bermuda’s
pensions pot, according to economist Robert Stewart. Mr Stewart, a fierce
critic of Government’s handling of pensions, says new figures reveal an average
$72,000 has been saved for each worker, indicating many face a major struggle
after retirement. The Pension Commission argued Mr Stewart had
over-simplified his calculations, and stressed it’s doing everything it can to
protect seniors although it warned many seniors will get only modest rewards on
their investment. The 2007 Pension Commission report, released this month,
shows 19,449 employees or self-employed people were taking part in registered
pension plans four years ago, with $1.4 billion in pension assets at that
time. Mr Stewart told The Royal Gazette: “This means the average is
about $71,983 per employee. Not much.” He complained people close to
retirement are unable to see how well covered they are because the report
offered no breakdown by age. “I suspect there is little saved for retirement
by those in the 50-60 age group which means horrible poverty in the future for
seniors as there is a reasonable expectation that people will live for around a
further 20 years,” he said. “With little savings, who will support them?
Santa Claus?” The Commission responded: “You cannot simply take the total
assets in pension plans and divide them by the number of members in pension
plans, as some members receive greater contributions than others based upon
their overall salary and wage levels, and some have been in pension plans
longer. “In addition, contribution levels payable by both the employer and
employee were initially low, gradually increasing from one percent in 2000 to
five percent in 2004. “It should also be noted that most plan members have
their pension assets in very conservative investments and so their returns will
be modest. “However, being this conservative should place them in a good
position when examining investment performance during the financial crises
starting at the end of 2008. “Although it is recognised that those employees
nearing retirement after the introduction of the National Pension Scheme
(Occupational Pensions) Act 1998 would not have the ability to accumulate as
much pension as those employees in the future having the benefit of 40 years or
more of contributions and investment earnings, how much more difficult would the
recent retirees’ financial position have been if mandatory occupational pension
schemes had not been introduced by this Government? “The Commission is a
regulatory body and not a financial assistance organisation responsible for
ensuring that seniors have adequate resources to sustain their standards of
living during retirement. However, the Commission will do everything in its
power to ensure that employees in private pension plans under its supervision
and regulation receive the utmost of protection as provided for under the
Act.” Mr Stewart also pointed out there were nearly 25,000 employees or
self-employed people at the end of 2007, meaning one out of every five wasn’t
participating in a registered pensions plan. “Why are only 19,449 employees
enrolled in a pension plan?” he asked. “Surely this means that over 5,000
employees are not covered and are therefore being robbed of their
pension. “Only two employers had an action taken against them. What about the
others? Did they get away with defrauding their employees? Surely, the Pension
Commission should be on top of this.” The Commission responded that, as of
December 31, 2010, the number of people on registered plans had climbed to
23,166. It added: “Furthermore, all members in plans required to be
registered under the Act receive the same level of protection. The fact that a
plan’s registration has not been finalised does not exempt employers or
employees from the requirement to make the required contributions. “The
report states that the Commission initiated civil debt recovery proceedings
against two employers. This does not mean that the Commission was not successful
in ensuring employers were compliant. “Indeed, the report also states that
over 125 compliance meetings were held with employers and plan members. As a
result of these meetings and other enforcement actions taken by the Commission,
but not stated in the report, employers were made to comply with their
requirements. It should also be noted that there were fewer delinquent employers
in 2007 than 2006.” The 2006 Pension Commission report was tabled in 2008; Mr
Stewart questioned why the 2007 report had only been released this
month. “Why is the report three years late? he said. “Surely, an annual
report should be available at the latest by June 30 of the following
year.” The Commission responded that the 2007 report was late mainly due to
staff shortages in the Auditor General’s Department. Mr Stewart said: “This
is a disappointing document which tells the public very little about the pension
situation. I would give them two out of ten. “This is surprising because
there are a few talented and hard working people on the Commission, and
[Commission CEO] Peter Sousa is no slouch when it comes to financial
matters. “I suspect Government wants to keep the bad news out of the press
because seniors are being given a bum deal. But it is only a suspicion as we all
know Government is on top of the financial situation.” He added that the
plight of seniors has likely got even more precarious since the report because
the stock market has plunged since 2007. Mr Stewart has repeatedly warned
Bermuda faces a pensions crisis which is only going to get worse as a result of
the ageing population. Last year, his research showed the Social Security
Pension Fund deficit was $2.8 billion, Civil Service Pension Fund deficit $760
million and MPs Pension Fund deficit $8 million.
