Public service workers will have their pensions and lump sum payments protected for the next two years.

David Burt, the Premier, revealed workers’ fears for the future and how they could be allayed yesterday in the House of Assembly.

However, he also highlighted changes ahead for the phased reduction of the lump-sum conversion factor following discussions with unions and officials regarding the Public Service Superannuation Fund.

Mr Burt addressed public officers eligible to retire by March 31, 2027, telling MPs: “Some wish to continue serving Bermuda, but have asked whether doing so could leave them with a smaller lump sum than if they retired on March 31, 2027.

“That is no small question for a public officer who has earned the right to retire, nor for the public service that may lose their experience.”

He explained that in September 2025, he legislation to the House to “stabilise” the fund after a 2023 valuation showed only 37 cents in assets for every dollar owed in pensions.

Without reform, its invested assets were projected to be exhausted by 2045.

The Government therefore changes contributions, retirement ages and the reference wage for retirement.

A 10 per cent increase for public service retirees, effective from April of this year, was agreed after more than a decade without an increase. Payments are expected to begin in October, including arrears back to April.

Mr Burt said officers had highlighted that “a sudden reduction in the lump-sum conversion factor could bring forward the retirement of people who still want to serve”.

Mr Burt then outlined sweeping changes ahead for workers, with a reduction in the lump-sum conversion factor to be phased in, and the cash amount available on March 31, 2027 to officers employed and eligible to retire on that date to be guaranteed if they remain in service.

He added: “When a public officer retires, they may choose to exchange part of their annual pension for a lump sum paid upfront. The lump-sum conversion factor determines how much is paid for the portion of annual pension they give up.

“The significance of this provision is clear from the choices public officers make at retirement.

“Between 2020 and 2025, approximately 1,000 members retired from the public sector, and 90 per cent chose to receive some level of lump-sum payment. For most retiring officers, the lump-sum conversion factor has a direct bearing on the cash available to them as they begin their retirement.

“For more than four decades, the lump-sum conversion factor was fixed in legislation at 11.5. It stayed at that level, even while the fund's financial position deteriorated. That fixed figure imposed costs the fund could no longer responsibly carry.”

He said the law was amended for the lump-sum conversion factor to be adjusted, following an actuarial review and consultation with the Public Service Superannuation Board.

“The Government’s actuaries have shared that if the lump-sum conversion factor were changed to match the funded status of the PSSF, then the lump-sum conversion factor would need to move from 11.5 to 5.75 in April 2027.”

The Premier said for someone exchanging the same portion of annual pension, the cash paid upfront would have “fallen in half in a single step”.

He added: “For officers eligible to retire by March 31, 2027, that raised a practical question: if I continue serving, will I receive a smaller lump sum than if I retire before the change?”

He said many still wished to continue serving, and that the island would lose out if experienced officers felt pressed to retire next March.

Mr Burt said the Public Service Superannuation Board agreed to both the phased change and the guarantee for eligible officers.

“Changes to retirement ages, pension calculations and contributions are being phased in between now and 2035. Public officers need time to adjust to changes of that scale. Changes to the lump-sum conversion factor should follow the same gradual approach, especially when so many officers make a lump-sum choice at retirement.”

The lump-sum conversion factor is set to remain at 11.5 on 1 April, 2027 instead of falling to 5.75, with required changes phased in alongside other pension changes approved last year.

The lump-sum conversion factor will be reviewed every two years by the minister in consultation with the board, with the aim of reaching a level that reflects the fund's financial position by 2035.

He added: “The second decision protects public officers who are employed and eligible to retire on March 31, 2027.

“If they continue serving, the cash value of the lump sum they could have received on that date will be protected until they retire, regardless of what the lump-sum conversion factor may be in the future.

“If their later calculation is higher, they will receive more. The guarantee is for that cash amount, not the 11.5 lump-sum conversion factor for future years.”

Mr Burt said the 1981 legislation would be amended to “give that guarantee the force of law”.

“Officers who are not yet eligible to retire on March 31, 2027 will still benefit from a gradual transition,” he said.

“They will have more time to understand how the changes may affect their own retirement. As always, an officer who elects to receive a lump sum takes an upfront payment in exchange for a smaller annual pension.

“An officer who takes their full pension without a lump sum is not affected by a change to the lump-sum conversion factor.

“Officers with questions about their personal circumstances may contact pensionreform@gov.bm.”