Bermudians have almost reached the first full year of deferred income under the Bermuda National Pension Scheme. This is a two part series on pensions and retirement in the global economy.

Today, worldwide the issue of having enough money to live on in later years is reaching worrisome levels for both governments and citizen populations. Enough so that fierce ideological battles are being waged in many countries, And the cause is absolute pure demographics. There are more of us older folks, then there are of you younger people. Knowing this, we still have time to plan for changes; so many, many are not so fortunate.

PUTTING LIVES INTO PERSPECTIVE To put things into total perspective, if you live in some parts of this world, your goal today is pure survival. Not to stop a bullet today; not to have your hands hacked off today; not to lose a leg to a land mine today; find shelter tonight in a partially blown out building; wonder if there will be a next meal of any kind. What must these poor forsaken souls think when exposed to even small segments of CNN and the implications of the enormous wealth elsewhere? Very unfortunately, today, if you are say, 87 years old, struggling, worrying (and perhaps, depriving yourself of regular meals) about getting by on a small pension, these are empty words. But who could have predicted this amazing turn of events? Healthy older people hanging around (and hang-gliding, rock-climbing, mountain biking, triathlons) going strong well into their late seventies. Not so long ago, most of our very near ancestors passed on to the golden world of eternal peace, at a much younger age.

GOVERNMENTS AND PUBLIC POLICY Civilised governments almost always have been formed and exist to serve their people. Great economists and politicians of yesteryear alike, have helped instituted thousands of public polices for the public good, among them social insurance and pension programmes for those elderly no longer working (or able to work). Generally funded by payroll taxes, income taxes or other less tangible transfer taxes, these programmes, in the past, have worked quite well. Too well, as the gap between what current workers contribute and the payouts to current retirees continues to accelerate. At stake today, are both the living standards of future retirees and the stability of public finances.

BERMUDA IS ANOTHER WORLD We, here in Bermuda, are a very, very small (very affluent for some) microcosm of the rest of the world, and our government faces and must cope with many of the same dilemmas. How will they be able to afford to pay future retirees the benefits they are paying today's retirees? Currently, Bermuda government pension pays around $700 per month (conservative estimate). Compared to other countries as a percentage of your final salary, it is low. Italy pays workers about 75 percent of their final salary of $20,000 - $50,000; France, 67 percent, Germany 45 percent, US 45 percent, only the UK compares to Bermuda's 24 percent ($8400 divided by $3500). In many countries' pension programmes, having enough worked years entitles you to some basic health insurance coverage.

WARNING FOR THE SELF-EMPLOYED Over the past 17 years, I have seen a couple of cases where somehow (don't ask how) a self-employed business owner of a construction company avoided ever paying any payroll taxes. Because no payroll tax was paid in, consequently, he was not eligible for government health insurance (Medicare) He became very ill (at age 60), and Died penniless, leaving a wife to scratch out an existence in the cold, very high unemployment area of very northern New Hampshire. There are restrictions in Bermuda, too. Remember, you get what you paid in for, nothing.

WE SHOULD HAVE SUCH A DEAL Many European workers opt to retire as soon as possible, no wonder, as they receive up to 75 percent of their final pay. Those governments absolutely know they can no longer afford to carry these workers at these rates for the next 40 years! Private Pensions, higher taxes, future pension benefit cutbacks, raiding current budget surpluses to pay these staggering non-predicted actuarial sums are all being considered. What will most probably be ultimately implemented are incentives for each worker to take individual responsibility for their own pension by investing in private pension schemes. Watch the European stock markets take off when this occurs, just as the IRA (individual retirement account) in the United States has been a huge force in driving that stock market.

ALL GOVERNMENT RESOURCES ARE NOT INFINITE Because the government is not a profit making business, Bermuda Government resources are finite; much of these resources are revenue derived from payroll taxes and consumption taxes (you know every time you trip 'off island' to shop and pay duty inbound).

These revenue sources are susceptible to the number of contributors; fewer businesses employing fewer people; fewer people buying goods and services, all can have an effect on the amount of tax realised. Inflation insidiously eats away at everyone's purchasing power.

We already know older people spend less; really because we are more mature, our needs are less. We understand that time (and quality of life) is the most precious commodity. Those already retired no longer contribute anything to the existing payroll tax structure. As stated earlier, there are more of us older folks, then there are of you younger people. So, where is the money coming from in the future? ONE PARTIAL SOLUTION IMPLEMENTED Bermuda and its government, over the past few years, have provided a two-part solution. They have established a national pension scheme and they have placed the responsibility squarely on you to take control of your financial future.

We, older folks know about this responsibility. The most important people reading this article today shouldn't be us older folks, we know what we have to do; but every young person between the ages of 21 and 35, because the earlier you save, the more secure your future will be.

And I leave you with a classic chart of two savers.

Person A (aged 21) saves $100 a month for only ten years and stops - Total investment $12,000 earning eight percent.

Person B (aged 35) starts saving $100 per month until age 65. Total investment $36,000 earning eight percent Note these are projections of estimates only. Actual results may differ. Iv invested in anything other than guaranteed investments, past performance does not guarantee future results. Chart courtesy of Olive M. Signor, Financial Services, The Bank of Bermuda Ltd.

Next week, we take a look at your pensions and how you can maximise your financial future.

Martha Harris Myron CPA is a Bermudian, a NASD Series 7 license holder, a United States Tax Practitioner and a Comprehensive Financial Planner. She is Programming Director for the Financial Planning Association of Bermuda.

Under no circumstances are the comments in this column to be taken as recommendations on the purchase or sale of securities or any other investment.