Imagine this real scenario (personal confidential information has been changed/excluded).

He is a middle-aged Bermudian. He was made redundant more than eighteen months ago from a decent job: good benefits, a pension allocation saved for his retirement. He has experienced a steady erosion of his savings for a ‘rainy day.’ Soon there will be none. He has managed to earn some daily living expenses in the interim within an underemployed position with no benefits. That business is also struggling. He does not know how long this opportunity will last.

He spends time trying to explore all of his financial options:

1. he is too young to collect from the Bermuda Government Old age contributory pension (Contributory Pensions Act 1970), besides he does not consider himself retired, far from it. he is not prepared to be ‘retired.’ He has skills and wants to continue in the job market

2. He still has a mortgage on the family home. He has already depleted the amount allowed under the Bermuda National Pension Scheme (National Pension Scheme (Occupational Pensions) Act 1998) emergency fund assistance programme to keep his payments current

3. He may be able to take the early retirement option under the National Pension Scheme plan, but the pension distribution choices (an annuity or a drawdown account) are limited to monthly payments over fairly long lifetime frame. Interest rates continue to sit at the bottom of the totem pole. He understands that an annuity purchased today quoted at a low interest rate — after deducting for management and administrative fees by the insurance carrier may return less than the total capital investment. Annuity returns do not change once the annuity contract is signed, so in the current market environment, an annuity does not look like a good deal. Now, if capital market interest rates were around, say a five percent annual rate, the annuity choice might be more palatable

4. He would like to have the ability to take a lump sum distribution, but currently, the National Pension Scheme legislation disallows this option.

The thought of ultimately having to apply for financial assistance — and be considered overqualified — and the possibility of losing the home is provoking many anxious sleepless nights.

In considered governmental well-intended regulatory largesse, through Parliamentary Acts, our politicians in the Year 1998 enacted the Bermuda National Pension Scheme. There had never been (to my knowledge) a general plan for all employers and employees in the private sector for a retirement planning structure. There is no doubt that many, many hours by committed individuals were spent drafting this legislation that appeared to be very appropriate for the time. Certain safeguards were built into the pension plan in order to encourage workers to save, and to plan for the future. One provision was to limit access to one’s own retirement monies until the age of retirement as specified in the legislation. A second restriction was that lump sum distributions were not allowed. Rather, the pension plan encouraged annuity for life distributions instead in order (my interpretation) to assure that retirees always had some monthly income.

However, the Bermuda Government civil service employees’ retirement plan (Public Service Superannuation Act 1981) does allow a lump sum distribution at retirement, along with a reduced monthly annuity benefit. And there the disparity sits. Anecdotally, readers and others have pointed out that the Government plan for retirement living has better options (choice of a lump sum distribution) than the pension plan that private sector employees are entitled to as working citizens.

Globally, retirement, pensions, and middle age employment challenges are inextricably linked. Early retirement for many is just out of the question. Middle-to-older age workers face higher redundancy statistics, and often find it harder to obtain another job. Older workers may not be considered “up to speed” with mainstream job qualifications. Yet, older workers can bring significant experience and skills to the jobs that are simply not attainable by a much younger individual.

Times have changed dramatically in our environment. While our severe economic downturn was foreseen by many, including some who might have been able to influence the outcome, the average middle-aged worker and family were far too busy staying actively alive, and probably could never have envisioned this turn of financial circumstances.

Any family now struggling to reduce a house mortgage balance is challenged. Recently, HSBC Bermuda reported a 17 percent increase in non-performing mortgages up to more than 650 million. The age statistics for these loans was not available through the press release. Nevertheless, older unemployed workers are significantly financially challenged, because they do not know what their employment options will be going forward. They can no longer depend upon the previously tried and true Bermuda retirement method: term deposits, dividends, rents, and full retirement pensions. They must move to survival mode — meaning reducing liabilities to the smallest manageable number.

These older individuals need access to all of their savings and pensions. Employees in the Bermuda business private sector subsidise their own retirement future through their own payroll deductions (contributions) and a match from their employer. They should be accorded the right to be responsible for managing their pension distributions in the same manner that they have saved for their retirement.

The Bermuda National Pension Act needs to be amended, tabled and brought into law.

What can you do if you are in this position? Contact your MP. Ask him/her to lobby for these National Pension Scheme changes. Stress the need to have access to your own pension savings. Highlight your immediate family financial difficulties and how keeping a roof over your head goes a long way to maintaining family financial solvency and any future retirement.

It is well to keep three things in mind.

1. This is your money.

2. These are unprecedented times in Bermuda.

3. You support your MP. He/she does not have to grapple with losing a job, paying a mortgage with no salary, or ironically, worry whether he/she will even have a pension. They have one — for life, paid for by you and us.

This is second article on the differences in retirement pension benefits between the Bermuda private sector employee and his/her counterpart employed in the Bermuda Government civil service.

The latest article on this topic, published in The Royal Gazette on April 05, 2014, generated a number of reader comments.

Next: How is society planning to anticipate these additional burdensome retirement costs? Does anyone understand what being without a job does to an individual’s self-esteem, pocketbook, and personal identity? There are always survivors. What do they do differently?

Martha Harris Myron

CPA PFS CFP JSM

Masters of Law: International Tax and Financial Services, Summa Cum Laude

Appointed to the Professional Tax Advisory Council, American Citizens Abroad, Geneva, Switzerland

The Pondstraddler* Life™ Consultancy providing planning for international tax, immigration, investment, retirement, legacy, and related financial challenges to the lifestyles of internationally mobile individuals and their businesses residing, working, crossing borders, and straddling ponds in the North Atlantic Quadrangle. Specific focus for residents of Bermuda, the premier international finance centre.

Contact: martha@pondstraddler.com

* Pondstraddler. A person with one foot on each shore whose heart resides in both countries*