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People allowed to withdraw a further $6,000 from pensions

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Pension withdrawal: Curtis Dickinson, Minister of Finance (Photograph by Blaire Simmons)

People suffering hardship because of coronavirus pandemic can withdraw an extra $6,000 from their pension funds, the finance minister announced yesterday.

Curtis Dickinson said he had “wrestled with the decision” to allow people another round of access to some of the funds put aside for retirement.

Mr Dickinson added further withdrawals could be made from July 1 and the scheme would run until June 30 next year.

He said the withdrawal would supplement existing regulations that allowed limited pension drawdowns for people who could show they faced financial problems.

But Mr Dickinson “strongly cautioned” that only people who had a critical need should apply and highlighted it would be difficult for people to make up the lost ground later.

He added: “An important consideration in such a decision is that the future consequences of withdrawing money now from your pension fund could be material, as, even if it is replaced in the future, it is likely to reduce what is available when one is no longer generating work-related income.

“Persons should therefore carefully consider their options.”

Thousands of people last year dipped into their pension pots to help them through the economic downturn caused by the pandemic.

They were allowed to take out as much as $12,000 and insurance companies said the average withdrawal was between $7,000 and $9,000.

Mr Dickinson said about $120 million had been taken out under the earlier programme.

He added: “It’s reasonable to assume most of that money was spent in the local economy, so it does have a stimulative effect.”

He added: “We recognise there are still people finding it extremely difficult to make ends meet.”

Mr Dickinson said only defined contribution plans were eligible under “the same criteria that applied earlier” and only plans registered under the National Pension Scheme (Occupational Pensions) Act 1999 were eligible.

Eligibility cannot be extended to members of defined benefit or annuity plans.

He advised anyone thinking about a pensions withdrawal should consider their number of years to retirement along with their financial situation.

Mr Dickinson said the $6,000 figure was decided in “trying to strike a balance” between the risk of people disadvantaging themselves later and the “expression of urgent need”.

Other emergency relief measures affecting pension funds included a move in June to allow the suspension of contributions for a year.

Mr Dickinson added the 31 key initiatives in the Government’s economic recovery plan would help carry the country “beyond the pandemic”.

He said: “Our economic recovery plans, as well as the protocols that we have established for effective and appropriate fiscal management, have already been evaluated by one of our major rating agencies.

“They have reaffirmed Bermuda’s previous strong sovereign ratings and assessed the outlook to be stable.

“This is a significant endorsement of Bermuda’s fiscal and economic programme and its plans for recovery and growth.”

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Published May 25, 2021 at 8:02 am (Updated May 25, 2021 at 7:46 pm)

People allowed to withdraw a further $6,000 from pensions

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