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Parliamentarians spar as pensions hike approved

Legislators passed a bill increasing pensions paid out to seniors by nine percent yesterday.But Government was reminded that eventually contributions would have to rise too and criticised the measures as a short term fix of a desperate administration.The Opposition United Bermuda Party also argued that set against an 11 percent increase in HIP contributions the benefits increase was almost meaningless.

Legislators passed a bill increasing pensions paid out to seniors by nine percent yesterday.

But Government was reminded that eventually contributions would have to rise too and criticised the measures as a short term fix of a desperate administration.

The Opposition United Bermuda Party also argued that set against an 11 percent increase in HIP contributions the benefits increase was almost meaningless.

And the UBP called for an actuarial study that would find ways of effectively increasing the benefits paid out to those who missed out on being part of the National Pension Scheme.

Finance Minister Paula Cox, in her opening statement, explained that all of the various benefits payable will be increased by nine percent come August and the changes will raise the maximum benefit payable to about $1,000 a month.

She pointed out that close to half the 8,500 seniors on pensions were at the maximum benefit. And the Finance Minister reminded the House that the increases will be funded by a one-off payment of $2 million from the Consolidated Fund to the Pension Fund and that contributions had already been set to rise by just over four percent.

And she boasted that the increase would be the fourth by her Government since coming into power in 1998.

Ms Cox assured the House that the fund is in good financial shape and ?is continuing to get stronger in the current market environment.?

As of March this year the fund was valued at $858 million ?roughly 12 times more than the annual payout of some $67 million in pensions and allowances?, and a $100 million increase in value over the year.

?What this means Mr. Speaker is that if the Fund did not receive any further contributions, it could continue to pay out pensions at the prevailing rate for some twelve years,? Ms Cox continued.

?However, the reality is that contributions will be increased and will continue through time. In addition, the prudent investment of the pension fund assets is also an important factor in the Fund?s financial position.?

She further argued that the nine percent increase was far in excess of the three percent inflation rate.

?This pension increase follows a string of other improvements to the quality of life of our seniors brought about by this Government,? Ms Cox added.

?In recent years, Government has amended the Land Tax Act to give additional relief from land tax to seniors who live in their own home. Last year, Government introduced a $1,000 prescription drug benefit for seniors enrolled in HIP.?

Shadow Finance Minister and Opposition Leader Grant Gibbons led criticism of the measures. ?This nine percent increase and a handful of other initiatives were a desperate attempt to reassure the public that the PLP still had a social conscience after five years in power,? Dr. Gibbons said.

?When they went looking for money it was hard to find because the well was running dry. The problem that this Government has is that they really need to be seen to be doing something for seniors because for all practical purposes they have done nothing for seniors.?

He added that while half of seniors received the maximum benefits payable, half didn?t.

?The problem is this is a short term fix which does not address the underlying problems that our seniors are facing and it postpones some unpalatable decisions that will have to be made later.?

He reminded the House that the $2 million to pay for the increase had come from the American bases settlement and should have been earmarked for maintaining Longbird Bridge.

The ?bridge money?, he said, ?does not cover the $7 million needed to pay for the increase in benefits so the other $5 million is coming from dipping into the principal of the Fund.?

?It is not fiscal prudence to be dipping into the Fund. If you want to build up the Fund, you cannot continue to dip into the Fund which is what you are doing.?

And he said that inflation faced by seniors outpaced the national rate of inflation.

On Ms Cox?s assertion that the Fund was in a healthy position, he said, it depended what period you looked at, and that there had been no increase in market valuation for three years from 1999.

Education Minister Terry Lister defended Government by saying he would agree with critics who say that the increase was not enough but that they had inherited an ?abysmal? situation regarding seniors benefits from the former UBP Government.

Opposition MP Louise Jackson said pensioners were being forced to pay 11 percent more in health insurance and some would find nearly half of their pension increase swallowed up.

?If you are getting a pension of $700 a month you are paying out $144.80 for health insurance, that?s a big chunk.?

For those only getting around $350 a month to pay $10 a more for health insurance diminished the significance of a $26 pension increase.

She said the cost of living was 380 percent higher for seniors living in Bermuda compared to those in the States. Her colleague Wayne Furbert said it would have been better to award a $50 a month flat rate increase rather than a nine per cent percentage rise to help those getting very little.

Government whip Ottiwell Simmons said those on the basic pension would get a net benefit of $51.65.