Seniors will receive a boost in their cheques when pension benefits are increased by 3.5 percent this August.

Finance Minister Paula Cox said yesterday the increase in benefits would be accompanied by a corresponding rise in contributions by an 4.75 per cent. Ms Cox told the House of Assembly that the increase would help retired persons on the Island who were relying on their social insurance as their sole source of income.

She pointed out that pension benefits were last increased by an "extraordinary" 9 percent last August through the different types of benefits payable under the Contributory Pension Act 1970.

There are currently 8,757 persons who receive benefits under the Act.

The basic contributory pension is $767.43 per month, and the maximum contributory pension currently available to pensioners is $1,015.48 per month. The proposed 3.5 increase, said Ms Cox, would raise the maximum benefit to about $1,061.06 per month. Currently 72 percent of the persons getting benefits under the Act receive the basis contributory pension, with nearly half receiving the maximum pension benefit.

Ms Cox said this marked the fifth pension increase that the PLP had put through since 1998. Pensions were increased by three percent from 2000-2004.

According to Government, the benefit increase has either exceeded the prevailing rate of inflation or has been in line with the underlying trend rate. Government calculations also reveal that in total benefits have been increased by 23.3 percent over a seven-year period.

Ms Cox predicted that the cash flow balance of the Contributory Pension Fund would remain positive in 2004/2005. Contributions are expected to exceed benefits for 2004.05 by approximately $11.5 million.

At the moment, the market value assets of the Contributory Pension Fund on March 31, 2005 were $932 million. In March last year, the market valuation of assets came to $858 million.

According to Ms Cox Government is not required to boost the fund with the $2 million announced in the 2004/05 Budget statement.

"The contributory pension fund is in good financial shape and is continuing to get stronger in the current market environment. What this means is that if the fund did not receive any further contributions, it could continue to pay out pensions at a prevailing rate for some twelve and a half years," she said. "However, the reality is that contributions will continue through time and will be likely to be increased from time to time. In addition, prudent investment of the pension fund assets is also an important factor in the Fund's financial position."

Shadow Minister of Finance and Leader of the Opposition United Bermuda Party, Grant Gibbons, told the House that the increase in the rate of life expectancy meant the length of time that people receive benefits was also extended, therefore putting additional pressure on the system.

Mr. Gibbons said 43 percent of seniors depended on their pension as a primary source of income.

"A quarter of our younger seniors and a half of the older seniors have incomes of under $12,000 per year. A high proportion are dependent on pensions as a principal source of income. The principal issue is also that there are a considerable number of seniors who are living below the poverty line."

He pointed out that with inflation almost 4 percent, seniors were still behind in that regard in addition to covering expenses such as electricity, fuel, and HIP premiums which also rise in price annually.

While MPs have enjoyed pay rises in their salaries of 4.5 percent, seniors were lagging behind with the 3.5 percent increase. Mr. Gibbons also explained that the 2004 increase of 9 percent was given out without a corresponding increase in contributions. Government had suggested the possibility of having the National Pension Scheme and the Contributory Pension Fund provisions integrated, however, Ms Cox stated that the move would have no clear tangible benefits to pensioners.

"Government's immediate focus and resources must be directed to ensure the existing pensioners are receiving a reasonable benefit while ensuring that employers are in compliance with the National Pension Scheme Act 1998," said Ms Cox.

However, Mr Gibbons said the Government had not explained the dynamics of how the social insurance scheme might work with the National Pension scheme. The National Pension scheme was established in 1998 and the benefits of this scheme are not extended to those who retired before that date.

He also called for a report on the broader long term health of the fund with a significant portion of the report devoted to looking at the benefits of merging the two schemes.

"I think we can do a better job for our seniors, 3.5 percent is still below the rate of inflation and below what we're paying ourselves as MPs."