What could be better about pension changes
This is part two of the overview of the original innovative Bermuda National Pension Scheme (Occupational Pensions) Act 1998, the National Pension Scheme (General) Regulations 1999 and the 2019 amendments to same that were tabled in House of Assembly on Friday, September 13, 2019 and which were scheduled to have their second reading yesterday.
We started the review last week (Part 1), an illuminating task, somewhat tedious task, but we’ve now waded through both Acts and the whole 35-page amendment. This sort of stuff is nowhere as interesting as a novel, but given that it is to be voted into actual law, will have a long-lasting positive impact!
There are 44 proposed amendments (and some additions) to the original National Pension Scheme (Occupational Pensions) Act 1998 and its regulations.
We covered the background on this innovative pension product incepted in 1998 for the private employees’ work environment and finalised with the most important, in my opinion, Amendment Clause 19 Section #24, a long-last awaited amendment to allow a 25 per cent lumpsum cash distribution for members (and former pension members) at retirement.
This week, we discuss some (space does not permit all) other important amendments, and items Moneywise had hoped would have been included, but were not.
Your Bermuda National Pension Scheme over the long term has the capability of becoming your largest asset, particularly for those young careerists launching initial forays into the workplace. Therefore, as a long-term international financial planner, I beg you to take charge of this asset, monitor your contributions and investment progress accordingly, on a regular basis.
This is your money.
An interesting change that will have an impact is Clause 2, Section 2 — an amendment that stipulates that non-Bermudians and Bermudian employees and self-employed individuals are now all subject to the Act.
The mandatory inclusion of expats in the scheme, along with a transitional contribution schedule, was conceived due to the perception, or fact, that employers not having to contribute to pension benefits for ex-pats gave them an unfair commercial advantage.
This is concerning in that being invested in a foreign pension may impact the foreign pension non-compliance with an expat’s home country tax regime. As it is, complications from dual-citizen Bermudians, expat spouses of Bermudians are still compounding international tax compliance problems for said individuals.
More flexibility on various circumstances to allow early withdrawal of retirement pension
• Clause 16, Section 21: person may elect early retirement pension if within ten years of retirement
• Clause 22, Section 34: allowing a variation of payments and benefits to disabled persons where a qualified medical opinion renders the individual life expectancy to five years or less
• Clause 41, under the Financial Hardship Regulations has been amended to allow for eligible funeral expenses and direct rental payments for persons receiving educational benefits
Small pension relief increased: Clause 23 replacing Section 25. Small pension lump sum payments will be allowed for accounts less than $50,000 where individuals have attained normal retirement age or already retired.
Employer responsibility to withhold and deposit contributions into employee pension plans.
• Clause 14, Section 19: pension administrators (and the like) of multi-employer plans have only 15 days to notify the Commission and the employer of unpaid contributions.
• Clause 15, Section 19A (civil proceedings), amended to provide for interest owed on unpaid contributions to be recoverable as a civil debt, along with
• Clause 36, Section 68A, where the Commission may impose civil penalties and for penalties to be recovered as civil debt payable to the Commission.
This Section is ambiguous in reading, as it is not obvious that the Commission itself will sue for civil debts as opposed to having the beleaguered employee having to take on a costly legal battle to recover stolen pension benefits. I will research for further clarification.
Changes not made that I had hoped for
Mortgage reduction relief for seniors: my opinion – the current pension law (and the proposed amendments) does not provide total equality between public servants and private-sector employees when it comes to older workers who, as homeowners, are struggling to meet mortgage payments.
Private-sector individuals who are close to retirement, should be allowed to take their entire pension, or as much as is needed, as a lump sum in order to satisfy the remaining mortgage principal balance.
A direct transfer from Pension Commission trustee to bank mortgage officer should be more than sufficient to satisfy the commissioners who feel that seniors are not capable of handling their own retirement funds. The comment is not meant to disparage the current law since stories of proceeds being frittered away on non-future retirement items do exist.
There are important reasons:
• The prospect of foreclosure is very real if negative equity occurs, while the now retired private-sector individual may not have sufficient income from monthly annuity payments to reduce the mortgage to zero.
• Public Service individuals may be the recipients of the proposed Government-backed mortgage lender help scheme to benefit from reduced interest rates and other assistance that the private-sector Bermuda islander does not realise.
• The US Federal Reserve cut interest rates again this week, adversely, affecting the returns on retiree savings.
• Forced early retirement in this redundant environment for seniors may mean little to no access to an appropriate future job to pay off a mortgage over time.
Leaving Bermuda with all benefits
Currently, according to the Amendments Act announcement, total withdrawal of pension benefit for expats leaving island still exists. Bermudians and spouses of Bermudians leaving Bermuda permanently, should have the same right to receive their pension in entirety as do non-Bermudian guest workers.
It is still unclear exactly how recalcitrant negligence by employers in withholding contributions will be handled. Attaching interest and civil penalties is meaningless if immediate action is not undertaken to control this erosion of employee benefits.
How this process will work, how much civil penalties will be and when, what methodology will be used for enforcement is not obvious. The longer it takes, the less the chance of recovery.
This righting of this wrong is not the employee’s purview. The Government is the one who put the laws into place; the Government is the one who has the ultimate responsibility to enforce the law and protect the employee.
Corrections, objections? I await your thoughts and criticisms, readers. Please keep writing – I will answer as volume of mail permits.
• Martha Harris Myron CPA CFP JSM: Masters of Law — international tax and financial services. Dual citizen: Bermudian/US. Pondstraddler Life, financial perspectives for Bermuda islanders and their globally mobile connections on the Great Atlantic Pond. Contact: email@example.com
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