Hikes in the amount civil servants pay from salaries towards their pensions moved a step closer after new legislation was passed by the House of Assembly.

confirmed the five percent contribution currently taken out of salaries was due to rise by one percent each year for the next three years from April 1.

The increase comes as the Government aims to deal with financial consequences of an ageing population working fewer years ? and cover a deficit in the Public Service Superannuation Fund (PSSF). The pension fund for retired Government workers is currently paying out more than it takes in, and Ms Cox branded this situation ?financially unsustainable?.

The Minister also confirmed that Police below the rank of Superintendent, firefighters below Divisional Officer and prison officers below Deputy Commissioner would contribute 6.5 percent of their salary. This deduction will increase to 9.5 percent from April 2008.has reported how a sum of more than $52 million was apparently written off in 2004/5 to ease pressure on the civil service pension fund. That followed a $35 million write-off in 2001.

Ms Cox told MPs that the law allowed shortfalls in the PSSF, a final salary scheme, to be topped up by the main Government account, called the Consolidated Fund. ?This should present a level of comfort for pensioners in that the PSSF is fully backed by Government.?

Explaining the pensions time-bomb facing many industrialised countries, and the reason for the contributions rise in Bermuda, she added: ?A civil servant retiring at 60 will, on average, receive a pension for around one third longer than a civil servant who retired at 60, 30 years ago.

?This represents a significant change in the balance between time spent at work and in retirement, which is financially unsustainable.?

She said that many private companies have responded to increased costs by closing final salary pension schemes. And she said the UK had made ?drastic changes? to its civil service pension plan.

Ms Cox said the contributions increase ? which Government will continue to match ? was part of a plan to put the PSSF on a more stable financial footing. She said a recent review showed that, regardless of the economic outlook and population trends, the financial position of the PSSF would continue to deteriorate unless contribution rates were raised, or the level of benefit reduced.

She added that the current five percent contribution rate always had been, and would continue to be, inadequate to support the level of benefits offered under the final salary scheme.

She confirmed that population shifts and insufficient payment rates led to the unfunded liability ? the total Government owed under the plan ? rising from $111 million in 1989 to $534 in 2004.

However, Ms Cox said fund assets had performed ?relatively well?, growing from $78 million in 1989 to $358 in 2005.

She stated that Government faced challenges on pensions and that payments above the matching contributions would be needed. But she added that Government would not shirk its responsibilities.

No ?significant resistance? was encountered from unions when the idea of upping worker payments was raised, the House heard. ?All parties recognised the importance of secure pensions to public servants,? said the Finance Minister. ?We must ensure that they are affordable and sustainable.?

Former Opposition leader said he was pleased that Government was now getting to grips with imbalances in the pension system. He said problems were evident in the 1990s and added that there was ?plenty of blame to go around? on how the situation was handled.

He said a possible future debate would be to look at what condition the PSSF would be in ten years down the line. ?Is the taxpayer going to be in trouble in a few years?? asked Dr. Gibbons, raising the possibility that the Public Accounts Committee could look at the topic.

Ms Cox, in response, said that in 1990 the then United Bermuda Party Government ignored expert advice that there was a ?gross mismatch? in contributions received and payments made. They also dipped into the pension fund to make payments, she added, which helped fuel problems.

Ending on a note of conciliation, she said that there was now a real need for cross-party action over the pensions problem.

The amendment act, which went through the House of Assembly on Friday night, is now due to be debated by senators.