Cash-strapped citizens have withdrawn more than $17 million from their workplace pensions since the rules on accessing retirement savings were relaxed.

Hundreds of people have tapped into their pension pots to pay for rent, school fees, mortgages and medical bills, according to figures shared with The Royal Gazette by the Ministry of Finance.

A total of $13.9 million has been paid out under a 2010 amendment to the law regarding occupational pensions. The change in the law had prompted 1,789 applications for withdrawals by the end of last year, 1,488 of which were approved.

The legislation only allows money to be paid out for certain types of hardship and, of the successful applications, 662 were for rent arrears, 481 were for educational fees, 226 were for mortgage arrears and 119 were for medical bills.

A further $3.3 million has gone to public servants under changes which came into force in 2012. There have been 253 successful applications to tap into that pot, with 126 for education, 70 for rent arrears, 50 for mortgage arrears and seven for medical bills.

The amount withdrawn from the occupational pension pot represents 0.4 per cent of the estimated $3.2 billion of assets held. The figure taken from the government plan amounts to about 0.5 per cent of the $575.7 million fund, according to the last available valuation from March 2015.

Finance minister Bob Richards told this newspaper he didn’t believe the withdrawals had done “significant damage to the pension fund pool”, a view echoed by economics lecturer Craig Simmons, who said they represented a very small amount of the total assets.

Mr Richards said the One Bermuda Alliance raised “one or two red flags” when former premier and finance minister Paula Cox relaxed the rules on pension withdrawals during the recession but “went along with it”.

He said the number of applications showed “there was a need” but he added: “I suspect that the withdrawals may be levelling off.”

The deputy premier added that government would monitor the situation but had no plans to repeal the amendment, even as Bermuda’s economy improves.

“At the end of the day, this money belongs to the pensioners, to the people,” he said. “The whole idea is so that people will have money when they need it. Our job really is to get the economy strong enough so that people don’t feel they have to do that.”

Mr Simmons noted that the amount withdrawn from workplace pensions was less than half a per cent. “Relatively speaking, I don’t think it’s a significant amount given the severity of the recession.

“I think most people would say that what we have been through is a once-in-a-lifetime phenomenon and that if people had the ability to dip into a pension pot that would have been a smart decision. It’s unlikely to happen again.”

He said the ability to withdraw from retirement funds should continue and applications should be successful “if the circumstances warrant it”.

“It’s a savings pot for individuals. Savings are there for rainy days. No one is taking the money out for a vacation.”

Economist Robert Stewart said younger people taking money from their retirement savings could end up being a problem for society in the future, when those individuals reach pensionable age without the finances to fund their final years.

He said the island had a growing elderly population, with a higher number of those aged 65 and over than ever before.

“A great number of those people have inadequate funds so they are either living on charity from their children or charity from charities or, alternatively, getting money from the government’s social welfare programmes,” said Mr Stewart.

He added that insufficient pension pots could place a burden on the rest of the population, as those in need seek financial aid.

As an example, he cited the likelihood of increased health insurance premiums, caused by elderly patients using hospital services without the means to pay, having their debts written off and the hospital increasing its fees to cover the costs.

Mr Stewart said younger people making hardship withdrawals from their workplace pensions would ultimately lose out the most, due to the nature of compound interest, ie the way investment returns themselves generate future gains.

“If somebody takes money out in their 20s or 30s they are doing something extremely foolish,” he said. “The money you put in accumulates over the years. If you have an eight per cent return [on your pension], the money doubles in nine years and quadruples in 20.

“You are doing yourself, big time, out of money, depending on your age.”

But he said the relaxed rules on withdrawals should remain in place.

“My own view, which is a bit 19th century, is let people make their own decisions and if they make bad decisions, at the end of the day, they have to pay the costs. But it’s better to educate people.”

Mr Stewart noted that the public servants’ pension pot — the public service superannuation fund — was already vastly underfunded, according to actuarial studies.

All employers in Bermuda must provide occupational pension plans for their Bermudian staff, under legislation which came into force in 2000.