A review of pension arrangements by the Bermuda Government could adversely affect employees’ eventual windfalls, according to statistician Cordell Riley.

Speaking after the Throne Speech, Mr Riley claimed that “what has not been said is more important that what has been said”, regarding pension matters.

Reading the speech at the opening of Parliament, the Governor, George Fergusson, said: “To address the challenges of an ageing population and to ensure that workers have financial independence and security upon their retirement, the Government will conduct a review to determine whether public and private pension contributions are set at appropriate levels.”

After the review, amendments may then be introduced to the National Pension Scheme (Occupational Pensions) Act 1998 and Regulations.

“These amendments will provide for significant changes to the supervision and regulation of pension plans and their service providers,” Mr Fergusson said.

In response, Mr Riley said: “It sounds like the Government may finally move from a defined benefit plan to a defined contribution plan,” adding that his theory was speculative but “within the bonds of reason”.

A defined benefit plan takes factors such as an employee’s salary and their total years with a company to formulate a regular payment system once they turn 65.

“On the other hand, a defined contribution plan specifies how much money will go into a retirement plan today,” Mr Riley said, adding that the amount was typically either a percentage of an employee’s salary or a specific dollar amount which may be invested in mutual funds.

A person’s retirement is therefore dependent on how much an employer contributes to the plan, how much an employee puts in the plan, how long the funds are left invested and how well those investments perform.

“Defined contribution plans are less costly to run since there are no long-term obligations to employees,” Mr Riley said.

“With an ageing population and a shrinking working population, it is easy to see why organisations who still have defined benefit plans are moving away from them. It is equally easy to see why employees would want to hold on to them.”

Jason Hayward, the president and treasurer of the Bermuda Public Services Union, suggested that the review should focus on helping elderly citizens.

“Pensions are the sole income for many of our seniors after retirement,” Mr Hayward said. “I would support a review that aims to provide seniors with a meaningful pension upon retirement.

“While both employers and employees may be adverse to an increase in contributions, these measures would hopefully reduce the number of seniors needing financial assistance and provide seniors with adequate incomes after retirement.”