The Bermuda National Pension Scheme Act has become the law of the land. And don't we know it as we practically learned the various pension providers' ads, in print, radio and television by heart. What does the new pension mean to each and every employee in real, practical terms? Let's talk about the real value of your pension cost in dollars and cents contributed today and what happens to the value `down de road'.

There are many pension rules and regulations; however, the three key points to remember are: There are minimum mandatory contributions for both you and your employer; You must be at least age 23 and work more than 14 hours per week; You must be "vested'' in order to receive a pension benefit.

The first year starts with minimum contributions of one percent from you and one percent from your employer on your total annual earnings including bonuses and overtime. In the second year, two percent from you and two percent from your boss is required, and so on up to the fifth year when you both are contributing five percent each.

You must be at least age 23 and work more than 14 hours per week.

Unfortunately, younger employees who choose to work right out of school may have five years in the workforce before they are eligible. Part-time jobs under the 14-hour minimum do not qualify for this benefit. You must be vested in your employer's pension plan; What is vesting? It means that you have a legal right to your total pension contributions after you meet a qualifying time. Under the Pension Act in Bermuda, once you have worked for the same employer two years, you have full rights to your total pension. If you leave your job even after one year and 364 days, you lose! The money you put in is yours, but all of your employer contributions on your behalf go back into that company's pension fund "pot''. You have just lost two years worth of savings! And when you begin another job, you must start all over again! If you leave several jobs in a row, you could conceivably end up at age 35 (or older), with no pension credits.

In the United States, pension-vesting rules are much longer. Many companies can require five -- seven years of full employment before vesting. In industries where people just do not stay in jobs long enough to vest, you see shameful statistics like these in the chart below excerpted from the Wall street Journal recently. Don't let this happen to you! How it works Now, let's explain the new Pension Scheme in `people terms'.

Listed below are three employee examples. Please note these are not real people.

1. Ron, age 25 and single 2. Danika, age 36 and married 3. Lloyd, age 50 and divorced To estimate what your pension would be worth, we used the following guidelines: Assumptions: Annual Earnings do not include raises, bonuses or overtime.

(Well, we all know that no one stays at a job for many years without any raise, but remember we are keeping this simple.) Inflation rate factor -- about average of 2 percent per year Rate of return on pension contributions invested -- 9 percent compounded annually. Contributions are made monthly. Vesting will take two years at the same job in all examples. Please keep in mind that these are estimates and as such cannot be guaranteed.

Meet Ron, age 25 Ron earns $30,000 per year. Frankly, Ron is really indifferent about getting a pension (like who wants to think about where you are going to be in 40 years)! Plus he doesn't like the smaller paycheque, although what they take out is barely lunch money. And as he says, his current job is boring so he may not stay for the two years anyway, maybe he'll take his paid-in amount (in cash) and buy something. He thinks in two years that will be about $900, barely enough to head out shopping in Atlanta.

Contributions: The full amounts that Ron and his employer will contribute each year are as follows: Year 1 -- 2% of $30,000 -- $600 Year 2 -- 4% of $30,000 -- $1,200 Year 3 -- 6% of $30,000 -- $1,800 Year 4 -- 8% of $30,000 -- $2,400 Year 5 -- 10% of $30,000 -- $3,000/And each year after at 10% ($3,000 for 35 years).

After two years, Ron is fully vested and has pension rights; his pension investment equals $1,909. Not very impressive, although $1,000 more than Ron saved on his own.

Using the assumptions stated above, that is, Ron's and his employer's contribution invested every month, calculating for the effects of inflation and compounding at 9 percent annually, look at the magic of compound earnings and the time value of money on the worth of Ron's pension over his earnings career! 5 years, pension equals $10,513 10 years -- $ 34,816 20 years -- $128,625 30 years -- $338,618 40 years -- $788,691 When Ron decides to switch careers or just go fishing, he will have accumulated more than three-quarters of a million dollars! All because he started at a young age and was forced by the pension rules to save consistently. I don't think anyone can call this lunch money now. But is it enough to impress Ron? Say for example , Ron decides to save on his own.

OK, let's assume, Ron does not know what he wants to do, and has now worked at six different jobs, not staying any longer than two years. He never meets the minimum requirement for a pension, but he feels that he can do just as well with his money by investing in Internet stocks, and setting up savings on his own. However, investing requires a minimum cash deposit; some months he spends the extra; his bike was in an accident and he paid cash for a new one; time goes by and he just does not get that $50-$150 a month put away, each and every month! But we want Ron to succeed, so let's see how his savings would do if he invested just $50 a month for 40 years at the same 9 percent rate of return. It would be about $202,730.

Because Ron chose not to vest by leaving jobs under the two-year limit, each year that he remains out of the pension system represents opportunity costs gone forever. In ten years, his pension would already be worth an estimated $10,354, and more if he upped his voluntary rate. Now that he is 35, and facing other commitments, marriage, children, home, mortgage, car etc. it becomes even harder to save something each and every month.

Let's look at Danika, age 36 Danika thinks the pension is a good thing. For the thoughtful, mature individual or couple (between 36 and 50), allocating some earnings to a pension becomes part of an organised comprehensive financial plan. And another component of investing for the future, along with saving for/owning a home of their own; raising a family; confronting the costs of secondary and college education for their children; building an emergency reserve and an eventual mid-lifestyle change/retirement portfolio for themselves.

Some mid-thirties to mid-forties people are still wrapped up in the short-term ebb and flow of their busy lives and careers. A pension contribution may still appear to be a rather insignificant event and not considered necessary to achieve their financial goals. After all, "times are real good right now and we can always set aside something later'' tends to be another viewpoint.

Statistically, financial advisors know that more than 50 percent of people in their mid-life (36-50 years ols) are still spending almost all their earnings.

Let's review Danika's contributions and investment record. She follows the same vesting schedule as Ron, but she already has less time to accumulate a decent pension. Wisely, she struggles to add extra voluntary contributions of her own money to catch up.

Danika's salary is $40,000 a year. Her regular contribution record is below.

Year 1 -- 2% of $40,000 equals $800 Year 2 -- 4% of $40,000 -- $1,600 Year 3 -- 6% of $40,000 -- $2,400 Year 4 -- 8% of $40,000 -- $3,200 Year 5 -- 10% of 40,000 -- $4,000/And each year after at 10% ($4,000 for 25 years).

Her compounded investment value 10 years equals $46,421 20 years -- $190,583 30 years -- $451,490 Danika does not think this will be enough to retire on, so she 'catches up' (at a very personal sacrifice) by adding an additional 5 percent -- 10 percent to be saving 15 percent of her salary after five years. Look at the difference! 10 years equals $75,849 20 years -- $268,202 30 years -- $697,704 Now for Lloyd, age 50 Lloyd earns $50,000 a year. He has saved some over the years, but time appears to be running out for this very conscientious employee and he worries not only about the quality of his life in retirement, but whether he will always have to work. He does not mind working, but what will there be for him when he is 65, 70, 75, 80 years old? Will there be any meaningful jobs that he could fill. His family is long-lived. He knows he could be around well into his nineties. Thus, to this mature employee with 10-15 years left in the workforce, a pension at this stage of his working life appears to be too little too late, or is it? Under the regular plan, Lloyd's pension value will compound for only 15 years.

Year 1 -- 2% of $50,000 equals $1,000 Year 2 -- 4% of $50,000 -- $2,000 Year 3 -- 6% of $50,000 -- $3,000 Year 4 -- 8% of $50,000 -- $4,000 Year 5 -- 10% of $50,000 -- $5,000/And every year after at 10% ($5,000 for 10 years) to 65. Lloyd's regular compounded investment value: 5 years equals $17,521 10 years -- $58,027 15 years -- $120,251 Added to Lloyd's other savings, $120,251 seems like a lot, but on seeing these numbers, Lloyd's worst fears are realised. He does not have enough savings to allow him to get by for another 25 years until he is 90. He meets with his financial advisor who suggests that Lloyd find a second job now, while he is still very capable and healthy. He must save consistently and steadily with the ultimate goal of reaching 25 percent of his salary invested in his pension in five years. This is a very hard, tough goal, but Lloyd must do this now in order to have any quality of life later. Look at Lloyd's revised investment values. Was it worth the personal sacrifice now? 5 years equals $66,839 10 years -- $178,527 15 years -- $349,228 Here is a gentleman who has worked hard all of his life and without the discipline and help of the Bermuda National Pension Scheme would be considering a marginal existence in the very near future. Now, with a financial plan in place, he can look forward to a retirement of dignity and self-sufficiency.

Martha Myron CPA CA is a Bermudian and a licensed (Series 7 NASD) Senior Financial Advisor with First Bermuda Securities. The opinions expressed in this column are her own and general in nature. Clients needing specific assistance should seek professional advice. Questions may be sent to her at 295-1330 X 241 or e-mail: mmyron yfbs.bm Golden years: How much will uou be worth when you retire?