Social insurance contribution rise delayed
Seniors are seeing a 1.4 per cent increase in their contributory pension benefits this month, backdated to August of last year.
The increased payout, which is in line with inflation, would normally trigger a simultaneous increase in the mandatory contributions made by those of working age.
However that increase is being delayed until August to allow time for the completion of an actuarial report on the Contributory Pension Fund that should be completed by the second quarter of this year, Curtis Dickinson, the Minister of Finance, said yesterday.
The report will be a basis for a policy change for reform of the social insurance system, he added.
“The 2018 increase in benefits would normally be accompanied by a corresponding increase in contributions by an actuarially recommended rate of 3.9 per cent,” Mr Dickinson said at a news conference in front of the Cabinet Office.
“However, in the 2018 Throne Speech, we announced that Bermuda’s social insurance system will be changed from a fixed-rate contribution to one based on a percentage of income.
“Therefore, contribution increases will be delayed until the actuary completes the modelling to effect this policy objective.”
Contributions were last increased in August 2018 by 4.2 per cent.
“As at September 30, 2018, the fund had total assets of over $1.9 billion, representing approximately 11.7 times the annual value of benefits paid in the 2017-18 fiscal year,” Mr Dickinson said.
“Considering the relatively strong position of the fund, it is anticipated that the fund can withstand the one year delay in contribution increases. However it is critical that the increased contributions come into force in August 2019.”
A 2014 review of the fund projected that there would be nothing left by 2049 in a “best-case scenario”. Heather Thomas, the Auditor-General, has called for policy action to address the issue.
Asked about the dire long-term outlook, Mr Dickinson said there would be an update with the publication of the actuarial report this year.
He added that the Pension Reform Commission was looking was at “an early stage” of coming up with proposals on how to extend the fund’s life, which could include raising the retirement age.
Mr Dickinson was joined at the event by a number of Progressive Labour Party parliamentary colleagues and seniors Valerie Dill and Esme Williams, who each expressed their gratitude for the increase in pension benefits.
“The wellbeing of our seniors is very much a priority for this government and we want to make sure that as the cost of living increases, so do their benefits,” Mr Dickinson said.