The number of people signed up to registered pension plans in Bermuda almost doubled in 2006, according to the Pension Commission's annual report, tabled in the House of Assembly last Friday.

As of the end of 2006, 970 employers and 18,487 employees or self-employed people were participating in registered plans, the latter figure representing a rise of 99 percent from a year earlier.

The huge increase was described as "positive news" by Finance Minister Paula Cox. The Commission reported that there was $1.2 billion in pension plan assets at the end of 2006, up from $1 billion a year earlier.

The number of delinquent employers and self-employed people went down to 737 at the end of 2006 compared to 792 the year before. The Commission held 60 compliance meetings with delinquent employers as a part of its enforcement programme.

The Commission administers the National Pension Scheme (Occupational Pensions) Act 1998, which requires that all employers and self-employed people maintain pension plans for themselves and their employees.

Bermuda, like many western countries, has an ageing population. Minister Cox said in the House of Assembly last Friday that the number of people greater than pension age (65) us projected to rise by 140 percent over the next 40 years, from around 7,700 to 18,500.

The resulting strain on the Island's Contributory Pension Fund (CPF) will be significant, but Minister Cox told MPs that the fund, which pays out Government pensions, was in "good financial shape" for now.

She based her comment on an actuarial review of the CPF, as of August 1, 2005, which showed a big improvement from the previous review in 2002.

"The main reason for the improvement in the Fund is that over the three years ended July 31, 2005, the real rate of return earned on the Fund was about eight percent a year, as compared to the real rate of return of 3.5 percent a year assumed at the 2002 review," Ms Cox said.

"Also Government's policy shift of increasing contribution rates by 1.75 percent rather than the previous level of 1.25 percent above the rate of pension increases has contributed to the improved financial position of the fund." She added that the value of the CPF at July 31, 2005, was $996 million, around 12.25 times what was paid out by the Fund over the previous 12 months.

The actuarial review, which was released to the public last Friday, states in its conclusion that the number of pension beneficiaries is expected to keep rising for the next 35 years and then start to fall. "Hence, over the long term, the cost of benefits is expected to increase substantially, relative to the contribution base represented by the employed population," the report added. "In order to keep pace with benefit outgo, contributions would therefore need to increase at a faster rate than benefits over the long term."

In this month's Budget statement, Ms Cox announced that pensions would rise by five percent and that Social Insurance contributions would climb by 6.75 percent to pay for the increase. And the actuarial review recommends that trend should continue, as under the three scenarios it considers, the Fund's expenditure will exceed its contribution income by 2010.

When and whether the Fund will actually start to decline depends on what investment returns it manages to earn. The actuaries calculated that if contributions were to increase by 1.75 percent more than benefits and the Fund were to earn an annual 3.5 percent return, then the CPF would increase for 18 years and then decline. "If the real rate of return were only two percent a year, then the Fund would be exhausted in a little over 30 years, but if the real rate of return were five percent, then the Fund would increase fairly steadily through the whole of the projection period," the actuaries concluded.

The next actuarial review of the Fund is scheduled for July 2008.