Foreign workers are propping up the Island's contributory pensions scheme, the Senate was reminded yesterday.

"It's a strange fact that nobody seems to appreciate. We've got an economy that cannot be staffed (fully) by the Bermudian population," said Government Sen. Calvin Smith.

Sen. Smith told his colleagues that, with the local population experiencing negative growth and people over the age of 50 the fastest growing segment of the population, Bermuda's demographics were unique.

He explained that the increase in work permit holders offset the negative population growth and ensured that payments into the pension fund kept increasing.

"We know that the number of young people paying into the fund is going down...but the gap is being closed by the foreign workers."

He said even where the foreign workers took out their contributions, the matching funds paid by their employers stayed in the fund.

But he also warned of the dangers of dependence on foreign residents.

"It comes at the cost of increases in the cost of housing and increasing conflicts between Bermudians and foreigners and the conflicts have nothing to do with the nastiness of Bermudians but leads us to the question of how many aliens can a country sustain?"

He added : "Here we are getting our health schemes and our pension schemes being propped up by foreign workers. If we don't do what we can to avoid these unhealthy consequences, then it's on us."

The Upper Chamber approved increases in contributions and benefits paid under the Government's contributory pensions scheme after little real debate and some reflection on the administration of the scheme over the years.

Introducing the changes, Government Sen. Patrice Parris said the last increases were in August, 2000, when benefits were increased by two percent and contributions pushed up three percent.

She said prior to 2000 the long term viability of the fund was in jeopardy, but Government was following advice to raise contributions by a higher rate than benefits.

The current increases would have people pay an extra 4.25 percent into the fund, while benefits are to increase by three percent. The effective dates for the increases are August 5 for contributions and August 15 for benefits.

It means that employees will now have $23.20 deducted from their pay slips - to be matched by an equal amount from their employers. And the maximum payable monthly pension will be $875.

Sen. Parris said Government had set a fund size target of $1 billion by 2037 and that should be achieved in good time.

"The fund is in sound financial condition," she said.

Sen. Walwyn Hughes (IND), a pensioner, recalled the days when the system was monitored using a book of stamps.

"It all started with this very simple system of stamps and a little book. Everything was peaches and cream and you couldn't go wrong because if the stamp wasn't in the book, it wasn't paid." He said while things became "unstuck" for a number of years, the administration of the scheme was now running smoothly.

"By 1995 or so everything was caught up to date and I know there have been clean audits since then," he said.

"The system seems to be working well."

He said Bermuda was ahead of many countries which do not have a dedicated pensions fund.

"I think the contributory pension scheme is something we can be quite proud of."

He pointed out the weakness of the scheme in that mandatory contributions were fixed regardless of one's income.

And he said most people do not get the maximum amount in benefits and in the past it was possible for employers to get away with not paying their share of contributions for many years leaving employees without a decent pension on retirement.

But now employees are notified of payments made on a regular basis.

Several Senators noted that the population is rapidly greying and that seniors will outnumber younger workers in the not too distant future.

And they said it was hard to live in Bermuda today on $875 a month.

"For persons renting I don't see very many places in Bermuda where you can rent a decent place for $875 a month," said Sen. Leonard Santucci (UBP).

"That's why we are seeing more and more people taking to the streets."

Sen. Michael Scott (PLP) reminded his colleagues of the National Pension Scheme which was based on ability to pay.

But Sen. Kim Swan (UBP) said that a number of people were "living at or below the poverty line" a situation which could not be addressed by a pension.

Senate President Alf Oughton (IND) said the Government ought to be given "full marks" for taking corrective action on the scheme.

"No Government no matter where you are is ever going to be in a position to supply a monthly pension that is going to take care of all your needs. It's not going to happen,"he said.

And he suggested that "greater emphasis" be placed on educating young people on "what life is going to be like in their later years...especially given the increasing numbers of people over 65 and decreasing numbers of younger working people".

Sen. Parris said that the Director of Social Services is aware of the need for education and is prepared to implement a programme.