Impact of pay cut and pension proposals – The Royal Gazette | Bermuda News, Business, Sports, Events, & Community

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Impact of pay cut and pension proposals

Impact of Government Pay cut and Pensions Proposal MPs and Ministers’ Salaries Background MPs and Ministers pay 12.5 per cent of their gross salaries into their pension fund called the Ministers and Members of the Legislature Pension Fund. Government employees pay 8 percent of their gross salaries into their pension fund called the Public Service Superannuation Fund. Government matches contributions of employees and MPs to their respective plans. Pensions are paid out based on a formula pertaining to the number of years in which contributions were made. Premier’s Proposal (simplified based on a $100 salary) Impact on MPs Salary Current Proposed Difference Gross Salary $100 $100 Less pension deduction 12.5 percent ($12.5) - Salary Cut of 12.5 percent - ($12.50) Salary Cut of 5 percent - ($5.00) Take home pay before other deductions (payroll tax, social insurance) $87.5 $82.50 $5.00 Result: MP take home pay before other deductions is $5 less Impact on Government MP Salary Expenditure MP’s gross salary cost to government $100 $100 Government pension contribution (12.5 percent) $12.5 - MP salary cut of 12.5 percent - ($12.50) MP salary cut of 5 percent - ($5.00) Total Government cost before other deductions (payroll tax, social insurance) $112.5 $82.50 ($30.00) Result: Government gains an additional $30 to spend Impact on Pension Fund MP’s pension contribution 12.5 percent $12.5 - Government pension contribution 12.5 pension $12.5 - Net contribution to pension fund $25.0 - ($25.0) Result: pension fund loses $25 of contributions Impact on workers Salary Current Proposed Difference Gross Salary $100 $100 Less pension deduction 8 percent ($8) - Salary Cut of 8 percent - ($8) Take home pay before other deductions (payroll tax, social insurance) $92 $92 - Result: Government workers take home pay before other deductions is unchanged Impact on Government Salary Expenditure Government worker’s gross salary cost $100 $100 Government pension contribution (8 percent) $8 - Government worker’s salary cut of 8 percent - ($8) Total Government cost before other deductions (payroll tax, social insurance) $108.0 $92 ($16) Result: Government gains an additional $16 to spend Impact on Pension Fund Worker’s pension contribution 8 percent $8 - Government pension contribution 8 percent $8 - Net contribution to pension fund $16.0 - ($16.0) Result: pension fund loses $16 of contributions