Increased pension pay-outs for retired public employees were approved in the House of Assembly on Friday — with many getting a 6.5 percent rise.

But those still working will find their contributions going up again next year as Government seeks to address shortfalls in the fund.

Announcing the increases, backdated to July, Finance Minister Paula Cox said they would cover retired Government employees as well as former Ministers and Members of the Legislature.

The cost of living increase will cover more than 1,900 retired civil servants, teachers, Police officers, prison officers and other Government employees.

Ms Cox said the increases will result in the Public Service Superannuation Fund (PSSF) paying out an additional $2 million in pensions per year.

She said Government was already starting to address the inherited problems associated with the PSSF by upping contributions to get it on a more stable financial footing.

Based on actuarial advice, PSSF contribution rates had been increased from five percent to six percent and 6.5 percent for regular members and uniformed officers respectively, effective April 2006.

Ms Cox said: "These contributions will increase to seven percent in 2007 and eight percent in 2008 for regular members while the PSSF contributions for uniformed officers will be increased to eight percent in 2007 and 9.5 percent in 2008."

She said un-funded liabilities of the PSSF have arisen for a combination of reasons dating back to 1982 when the fund was first established.

But she said the assets of the fund continue to perform relatively well, and at September 30, 2006 stood at approximately $388 million — roughly nine times more than the annual projected benefit pay-out of some $41 million in pensions and allowances for this fiscal year.

And she said the value of assets in the Ministers and Members Fund on March 31, 2006 was just over $7.7 million — roughly 25 times more than the annual projected pay-out of some $310,000 in pension benefits.

Opposition MP Grant Gibbons raised questions about the under-performance of the fund which meant the taxpayer had to pick up the tab when around $50 million was pumped in from the consolidated fund.

He said the actuary had expected a return of 7.5 percent but between 2001 and 2004 the growth rate had only been two percent.

However, backbencher Government MP Terry Lister said massive declines in the North American stock market had affected funds worldwide.