institute a long term national pension scheme.

Finance Minister Grant Gibbons outlined a framework for mandatory pension during the second reading of the National Pensions Scheme (Occupational Pensions) Act 1998 in the House of Assembly on Friday.

MPs passed the legislation early Thursday morning after a six-hour debate.

Dr. Gibbons cited the "advanced state of decay'' of many other nation's social security programmes and said the goal was to avoid such problems in Bermuda.

He stressed that the contributory pension fund was "in no danger of becoming insolvent'' but said it was important to take into account demographic changes in order to avoid problems further down the road.

He mentioned that local birth rates were declining and people were living longer, thus creating concern for the economic state of a growing elderly population.

Dr. Gibbons proposed three challenges posed by the plan: long-term viability, adequacy of pension income, and the security of pension assets.

He admitted the current maximum pension income of $796 per month was not satisfactory.

And he expressed concern over the risks to pensions if a business failed and the pensions were absorbed during liquidation.

Dr. Gibbons also addressed the need to have pension funds that were mobile and were able to shift along with an employee changing jobs.

And he said a pension commission would be established to address legislation, promote the establishment of pension plans, and to advise the minister.

Shadow Finance Minister Eugene Cox echoed many of Dr. Gibbons' concerns and questioned whether any taxes would have to be paid, whether an employer should be allowed to influence employees on pension matters, and how the funds should be invested.

Government Whip Quinton Edness told the House he wanted to ensure that the Act would not prevent people over the age of 65 from working.

He said there should be no "undue difficulties'' for self-employed individuals, and said guidelines needed to be put in place to ensure that residents would not become "a burden on the State''.

PLP MP Ottiwell Simmons stated: "This scheme had its roots in pre-UBP days -- it's only yielding the seeds planted by socially-conscious people.'' He noted that 50 percent of the work force was already covered by two pensions, and the goal of the Act was to address the needs of the other 50 percent.

And he said the pension scheme made better economic sense than holding a bankbook.

But Mr. Simmons said the Act was "fraught with problems'', and stated: "Once you put another five percent liability on employers, some won't be able to pay and will likely be out of business.'' There should be safeguards to ensure that the pension funds are in safe hands, said Mr. Simmons.

He said the money belonged to employees but would be used by insurance companies and the like. It was important to ensure that workers benefitted from the fund.

Home Affairs Minister Maxwell Burgess said the benefits would be a life that was as comfortable as possible and, through the funds, Bermudians would be able to become share owners in Island companies.

PLP MP Derrick Burgess said he hoped there was provision for those people who wanted to work beyond the normal 65 years retirement age.

And he questioned the effect the pension contributions -- which will become five percent each for the employee and employer -- would have on small businesses.

He said some businesses could lose out if they were having to pay social insurance as well.

Tourism Minister David Dodwell said the plan would be phased in over five years, starting with a one percent contribution -- providing businesses with opportunity to plan for the scheme.

He said education of the public would be an important aspect of the commission's work. In addition he said protection of funds would be enshrined in the legislation.

PLP MP Paula Cox said the calibre and quality of the administrators would be of paramount importance.

She commented on a compensation scheme that operated in the UK and asked whether there would be arrangements for Bermudians working abroad and non-Bermudians to still have their pension rights.

UBP MP Michael Dunkley said it was a great day for Bermuda and encouraged people, who previously hadn't thought about pensions, to consider saving for their golden years.

The PLP's Ottiwell Simmons and Derrick Burgess both questioned the age when the pension fund would begin.

Mr. Burgess said that 18, rather than 23, would be an appropriate age for the establishment of a pension fund.

And Mr. Simmons stated: "If they're employable, they should be pensionable.'' But Premier Pamela Gordon said that if the fund began at 23, the employee would have "a significant period of time'' -- more that 40 years of investment -- under their belts.

Finance Minister Grant Gibbons said many such considerations were "balancing acts'' and said 23 was a reasonable midpoint age.

Mr. Simmons also questioned whether the pension could be used as collateral, noting that such a fund represented a tremendous cash asset.

But Tourism Minister David Dodwell said allowing pensions to be used as collateral would set a "dangerous precedent'' and said it defeated the whole point of having pension.

Opposition backbencher Walter Roberts said pensions should be able to be used in a tangible way, stating: "A man has to live.'' Mr. Simmons expressed concern over the amount of pension funds available to low-wage tip-workers such as some who work for hotels, restaurants, or gas stations.

He said since much of their wages derive from tips that would not be factored into the percentage taken out of their paycheque for pension fund, they may find themselves with a relatively low fund once they reach retirement age.

Mr. Simmons suggested that it was necessary to enter a dialogue with tip-workers to ensure they understood their options and the ramifications of decisions they made about their pension fund.

He proposed that Government meet with tip-workers to educate them about the possibilities for their pensions and stated: "Failing that, you have a system without equity.'' Dr. Gibbons mentioned that such workers would have the option of contributing more than what was taken out of their basic salary.

Dr. Gibbons moved that the Bermuda Monetary Authority Amendment Act 1998, the Companies Act Amendment (No. 2) Act 1998, and the National Pensions Scheme (Occupational Pensions) Act 1998 be passed.

All three Acts were passed and Premier Gordon motioned that the House be adjourned.

IT'S IN THE BAG -- Finance Minister Grant Gibbons, shown here before Budget Day last February, guided the Pensions Act before Parliament.