April 8, 2014

Dear Sir,

The Bermuda National Pension Scheme (BNPS) fund distribution needs to be amended.

Further to Martha Myron’s article of last week I would like to emphasise such pension funds belong to the pensioner, and the Pension Commission has a fiduciary responsibility to the pensioner to reflect the pensioner’s circumstances, needs and to provide the opportunity of a good investment return.

May I suggest that the Bermuda Pension Commission is currently failing in all aspects and the pension laws need immediate changes. In the UK, USA, Australia and many other countries, pensioners are allowed to withdraw 100 percent of their pension funds upon retirement and Bermuda pensioners need this option.

Why? Because the alternatives at present are not in the interest of the pensioners, who are being forced into a number of ludicrous options all of which are to the detriment of the pensioners. Many pensioners would be far better off by withdrawing the funds and investing such funds themselves.

Analysis of the current options:

The short term annuities are totally unrealistic and biased in favour of the annuity company, and the longer term annuities provide no investment return whatsoever but purely pay out the original amount over time and must be placed with poorly rated local insurance companies.

The BNPS Drawdown Formula for Preferred Products produces an annual declining pension as the fixed percentage, as applied within various age groups, is on the remaining declining balance after drawdown. For example consider a conservative investment portfolio whereby the investment return is absorbed by the administration costs. On a $100,000 pension fund the allowable drawdown each year for the age group 70 — 80 is 10 percent applied on the balance of the fund. At age 70, one would receive $10,000 at 71 $9,000 etc and at 79 you would only receive $1,000. The average payout for a Preferred Product is for a period of 15 — 20 years. The pension administrator’s annual and withdrawal fees, over the payout period are considerable.

I understand that there are many other pensioners who are aggrieved by the current payout rules. There also seems to be a lot of dissatisfaction with the current restricted rules by the Pension Fund Administrator, who state their hands are tied by policy. Clearly, as documented above, the current BNPS Drawdown Options are not in the interest of the pensioners.

Most pensioners would be far better off and receive a much higher return if they were allowed to withdraw their funds and invest as they saw fit. I trust that the Pension Commission and the Minister will note the dissatisfaction of many pensioners and change the laws accordingly as the pension funds are the property of the pensioner.

A CONCERNED PENSIONER