The Senate rubberstamped pension increases for Government workers but flagged up fears about the health of the fund as well as Bermuda?s rising inflation rate.

The rise affects retired politicians, Policemen, teachers, prison officers as well as other former Government employees.

The pension rises are backdated to July and are dependant on when an individual?s pension started with the rises ranging from one percent to seven percent.

Those whose pensions began before June 30, 2002, get seven percent with rises diminishing for those who retired more recently.

The measure is designed to make sure the fund keeps pace with inflation and had all party support but gave rise to concerns both about the fund and the state of the economy.

Independent , a former Financial Secretary, said imbalance in what was paid in and out was putting strain on the public coffers which had to top up the fund.

He said every year Government and employees paid in five percent each ? amounting to $24 million in contributions which was $8 million to $10 million short of what it should be.

?We have known about this for a long time,? he said. ?When I was in a position to tackle this it was very difficult to get anyone to do anything about it.

?Five percent is not enough, we need more like seven or eight percent.?

He said the fund paid to Policemen and firemen, who had short careers and thus paid in less.

The problem had been compounded by a depressed stock market, said Sen. Hughes, which had seen assets fall from $274 million in 2001 to $213 million last year.

?That?s $70 million less than two and a half to three years ago.

?I don?t know what the answer is.?

Opposition said the Public Service Superannuation Gund was under-funded but, in other countries, the fund was entirely kept going out of the Government coffers.

?When it was set up it wasn?t funded,? he said. ?It was funded after five years.?

He said Bermuda?s inflation rate was out of pace with its competitors.

For the first eight months of the year, American inflation had been an average of 2.45 percent while in Bermuda it had been 3.35 percent, said Sen. Richards.

?Over 30, 40 or 50 years that can make a substantial difference in the purchasing power of your money.?

He said Government had exacerbated the situation with wage rises in the civil service outstripping the rate of inflation.

?Bermuda Government?s civil servants are some of the highest paid civil servants in the world,? he said.

Independent said the pension increases looked good but were a drop in the bucket compared to increases in other areas such as health care and car insurance.

Senate President said he was worried about inflation-busting pay increases in the public sector which would drive up private sector demands and increase inflation.

Government said the problems with the pension fund were not easily solved but that an actuary would be looking at it.

And he said the assets of the fund had done extremely well in the past year, increasing to $307 million ? a return of 13.8 percent.

?Over a ten year period the return on the fund was 12.12 percent versus the policy bench mark of 8.6 percent,? he said.