A proposed national pension scheme is needed to avert a looming "crisis'', Government says in a discussion paper.

Numbers of retirees in Bermuda are swelling, relative to the number of workers paying into pension plans. Mainly due to greater longevity, earlier retirements, and declining fertility, the same imbalance exists in countries around the world.

The Contributory Pension Fund that Government set up in 1968 is projected to be in a deficit within six years, says the Green Paper.

But the paper, tabled in the House of Assembly on Friday by Finance Minister the Hon. David Saul, says there are other reasons why a national plan to provide for retirement income is needed.

"All the present facts point to a bleak future for Bermuda's retirees in 20 to 30 years if corrective measures are not taken in the next few years,'' Dr.

Saul said.

First, the CPF was never intended to provide retirees the money they need to live. Currently, the maximum benefit at age 65 under the CPF is $730 a month.

Yet private schemes cover only about 50 percent of the workforce, and Government estimates that only half the workers who are covered by a plan are "reasonably assured of a satisfactory level of retirement income''.

Government considers 60 to 70 percent of final income an adequate pension and is also concerned that some private companies do not have pension funds separated from other company funds, meaning they would not be protected if the company went broke.

As proposed in the Green Paper, the National Pension Scheme to be implemented in 1997 would require: A contribution of five percent of an employee's salary, matched by the employer. The total ten percent target would be reached over five years; Establishment of a Pensions Commission to register plans, help administer the Pension Trust Funds Act 1966 and serve as the Government supervisory authority for pension funds; Segregation of all pension funds from the working capital of the company; Proper plan administration, with pension trustees charged with prudently managing the funds, and performing other record-keeping and administrative duties. Trustees could contract out some functions to third parties like pension administrators or insurance companies, but would retain ultimate responsibility; Early "vesting'' of pension plans, meaning that a worker becomes entitled to a pension that includes employer contributions, perhaps after two to five years with a company; Portability of pension funds, meaning that when workers move from job to job, accumulated pension contributions move with them; Actuarial valuations required every two to three years for "defined benefit'' plans, which are much more complex to administer than "defined contribution'' plans, and; The CPF would "have a continuing role to play in the revamped pensions environment in Bermuda''.

The paper says that such a scheme would have "significant'' impact on Bermuda's economy. The proposed contribution rate of ten percent of salary means contributions would eventually rise to more than $100 million a year, or about five percent of Bermuda's gross domestic product.

"A portion of this savings pool could provide a primary source of capital for commercial and residential construction, social infrastructure such as educational plant and health facilities which require secure long-term financing,'' the paper says.

Currently, most pension funds are invested overseas in high grade securities.

It is estimated the increased level of savings would subtract about one percent a year from retail sales, or about $5 million.

Mr. John Sainsbury, head of the Argus Group and managing director of Bermuda Life Insurance Company Ltd., said Bermuda Life is the leading pension provider on the Island and his staff was involved in consultation that led to preparation of the Green Paper.

"We've been busy enough without it,'' but legislation "would certainly make (pensions) more widespread'', Mr. Sainsbury told The Royal Gazette .

While such legislation was "abhorrent to some people, the aim of getting a decent pension for everyone, I think, is to be applauded''.

Portability would be the most significant and challenging aspect of the new plan, he said. Presently, it is easy for people who change jobs several times to end up with no pensions at the end of their careers.

A concern with public pension plans was that benefits could be topped up by Governments wishing to garner the favour of voters at election time. Because the Government scheme would be essentially private, this was not a concern.

"It's absolutely essential to organise something like this to provide adequate pensions that are out of the political realm,'' Mr. Sainsbury said.