The National Pension Scheme (Occupational Pensions) Act 1998, tabled by the Finance Minister in Parliament last week has won acceptance from the Island's largest domestic pension provider, Argus Insurance Group.

Pensions are provided through Argus subsidiary, Bermuda Life, a firm that will be competing for new pension business that is estimated to be larger than the existing pension market.

Government's discussion paper on pensions stated that approximately half of the work force in Bermuda had pensions, and half of those were in properly constructed schemes.

In that new market, Bermuda Life will be seeking to maintain its position as the leading provider of private pensions in Bermuda.

The main purpose of the new legislation is to make provisions in respect of a mandatory pensions system, making it required of employers to ensure that their full-time, and the majority of their part-time (at least 720 hours a year), workers are members of a registered, and Government-approved, pension plan.

The measure excludes the Public Service Superannuation Fund for civil servants, the Contributory Pension Fund and the Ministers and Members of the Legislature Pensions Fund, all of which are operated by Government.

The plan is expected to come into effect January 1, 2000, at which time it would be required that fund members would contribute to the fund at least one percent of their pensionable earnings, which is to be matched by the employer.

That minimum requirement would increase one percentage point a year to five percent each after five years.

Argus CEO, Gerald Simons, said that the bill would remove some of the concerns in the community over the proposed scheme. He said, "One concern was the cost of pensions. The Minister has responded to those concerns in two significant ways.

"First, the scheme's schedule would require at least one percent in the first year, increasing incrementally. Originally, it was being suggested that it begin at three percent. The current proposals make it relatively easy to start a pension plan. "Another significant thing is that employees are not required to be in a scheme until 23 years of age. Employers are therefore not discouraged from hiring young people because of the added expense of a pension plan.'' Mr. Simons said he was surprised that the bill was revised so quickly after an original draft was presented to pension providers just this April.

He said, "We were pleased to see the grand fathering of contributions made before the Act comes into effect. Persons who have certain rights under their existing plan to withdraw funds upon termination of employment, will retain those rights.

"That was one of the fears: that those who had been in a pension scheme and who had made personal plans on the assumption that they would withdraw their money and use it to pay off their mortgage, or whatever, would be prevented from doing so.

"There is a restriction on that for any new plans, but the previously existing rights are being grand fathered and protected. For future schemes, the funds are being locked in to ensure benefits can be paid.'' Mr. Simons also noted, "The original Green Paper favoured defined contribution plans because they are so simple and it's very easy to have portability between plans.

"The pensions commission, which is to be established under the Act, would have to set out the rules that control portability to, and from, defined benefit plans.

"If someone left a company that used a defined benefit plan and wanted portability to his new employer's defined contribution plan, the value of the pension earned to date would just have to be actuarially calculated.

"The bill points out that one of the roles of the commission is to set out the rules of the game, if you like. That's a technical matter, but it can be done.'' Mr. Simons also was impressed that administrative arrangements provided for by the bill were simple, keeping costs down.

He said, "This Act will be refined. I'm sure there will be problems encountered and there will be changes needed. But it's a good start. The Minister has made tremendous progress over the last two months to get the Act in this state.

"The original draft had several technical flaws which had to be addressed.

And in its present form, there are still some technical questions that need to be clarified. But it is now an impressive piece of legislation for what it attempts to achieve.'' Gerald Simons