Dear Sir,

Does anyone out there want a financial literacy lesson? If so, you need to go no farther than to listen to the last 14 minutes of the Hansard recording for the morning session of the House of Assembly on Friday, September 27, 2024.

The subject being debated was the National Pensions Scheme (Occupational Pensions) Amendment Act 2024, which would allow members of a local defined contribution pension plan to take some of their funds, in some cases up to 30 per cent, to buy a home. (As of this writing, the Bill has been passed with mixed support and there were reservations from a number of MPs.) As recently reported in this newspaper, during the debate, the former finance minister Curtis Dickinson rose on the matter and spoke in the House about his deep concern regarding the future negative effects this legislation might have.

Mr Dickinson introduced himself by outlining his private-sector business résumé as follows:

• Almost 30 years of financial industry experience, with 11 years as an investment banker in New York and London, and 12 years as a senior leader in one of Bermuda’s commercial banks, running group-wide businesses

Referring to this legislation amendment and the attraction of homeownership, Mr Dickinson spoke about how there is great pride in owning a home in Bermuda and how it is the dream of most everyone to own a piece of the rock.

He balanced that emotional side of the discussion with one of the most profound financial literacy presentations I have ever heard from any Bermudian politician.

He spoke of the critical importance of people saving for their eventual retirement. He discussed the value of a pension and how pension funds work, and how many countries’ pension schemes are substantially underfunded — in the case of the United States, by $1 trillion annually.

That underfunding is known as a “pension gap”. He noted that Bermuda is no different, albeit the fund numbers are on a much smaller scale.

So what factors contribute to this underfunding? While there are many complexities to pension funds, he explained that there are two main reasons for a pension gap:

• People are not saving enough for retirement

• People are living longer in their retirement

He was clear in his strong opposition to this Bill, emphasising that this was a policy amendment the people can ill afford and, instead, we all should be contributing more to our savings plans.

He mentioned that the government Contributory Pension Fund, the Public Services Superannuation Fund, and the Ministers and Members of the Legislature Pension Fund were “all underfunded by a significant value”.

He spoke about the critical element which affects the “wealth” of all investment/retirement funds — ie, the compounded interest factor.

That is the interest which is continually earned on the ever-increasing fund balance. And the longer the money stays invested, the more significant the overall growth, even with modest contributions. Bottom line, the earlier you start investing, the more you will benefit from that compounded interest upon retirement.

You should know that this pension scheme amendment Bill was first tabled last week by our new Junior Minister of Finance, Jaché Adams, and he noted that it excludes the defined benefit pension plans, such as those for all public officers — ie, CPF, PSSF, MMLPF.

Mr Adams warned this was because “any deviation, such as a one-time refund, would undermine the stability of these plans and potentially affect the long-term security they are designed to offer”.

Towards the end of his speech, Mr Dickinson made a tactful but possibly “backhanded” compliment to Mr Adams, saying that his very concerns for the government pension schemes exactly confirmed why this policy amendment for other plans is so dangerous on multiple fronts. (Plan stability, long-term security, etc).

My takeaways from Mr Dickinson’s presentation were pretty straightforward.

Financial planning: It is essential for everyone. The earlier you start saving for, and then keep contributing to your retirement savings plan, the greater the returns.

Financial literacy: Understanding the importance of sound, fiscal decision-making, —including budgeting, savings, investing, debt management, retirement planning — whether it be in your personal life or within the halls of government will always be “best practice” and very valuable in planning for the future. Without it, financial failure is inevitable and we certainly have plenty of evidence of that staring us in the face.

So, yes, that was an excellent financial literacy lesson in the House of Assembly on Friday. When Mr Dickinson spoke, it was like the awakening of a sleeping gentle giant, who then proceeded to inject some sense into an otherwise nonsensical conversation on the fiscally irresponsible pension Bill amendment.

During those 14 minutes, there was complete silence in the background from all those present and then, after Mr Dickinson took his seat, the House session was adjourned for lunch. I would venture to say that the lunch break yielded some very interesting exchanges.

Pass the Alka-Seltzer, please.

BEVERLEY CONNELL

Pembroke