Retirement should be a pleasant prospect, replete with relaxation after a hard few decades’ work, more time with loved ones, nice overseas trips and more time pursuing the pastimes we really enjoy. However, the idyllic vision of the “golden years” is becoming less attainable. That was the blunt message from the Bermuda Chamber of Commerce’s retirement breakfast event this week.

Miguel DaPonte, senior vice-president for BF&M Investment Services, told his audience that many people were facing a retirement in which they would not be able to afford average Bermuda living expenses. Basically, those of us of working age are generally not paying enough into our pension plans to have anything like a comfortable retirement.

The main reason is that we are living longer than we used to, so need a bigger nest egg to pay for our post-working years. Then there is the prolonged period of extraordinarily low interest rates that have battered returns for savers and cut growth rates for pension funds.

Also, Mr DaPonte pointed out that the defined benefit pension, which used to guarantee a specified income — for example, a percentage of final salary — is rapidly becoming a thing of the past. The trend towards defined contribution plans leaves nest eggs much more at the mercy of the financial markets.

The upshot is that we need to save more. The standard pension contribution of 10 per cent, split between employee and employer, will not cut it, says Mr DaPonte, who recommends 15 per cent. Social insurance benefits will be virtually gobbled up by healthcare costs alone, he said.

The new reality dictates that we must either make greater sacrifices today in the interests of comfortable retirement years, or adjust our expectations for our later years to include more work and less play.

The government-run pension funds offer no grounds for comfort. They are under tremendous stress, with hundreds of millions of dollars of unfunded liabilities. We were promised in the Throne Speech last week that these funds’ ability to deliver the necessary payouts in the future will be reviewed to calculate whether the contributions employees make today are sufficient. You can bet your bottom dollar that the actuaries will recommend an increase in contributions.

It’s not difficult to see why. The number of people over 65 in Bermuda will be about 12,000 in 2020, compared with 8,700 in 2010, according to projections by the Department of Statistics. At the same time, the working-age population is expected to decline, leaving fewer people paying into a system that is supporting substantially more seniors.

While employees and employers alike will be aggrieved at seeing the Government take more out of their pockets each month, the alternative would be to reduce the benefits paid to seniors. Each choice is politically unpalatable, but something will have to give. The numbers don’t lie.

Seeing the problem of the looming pensions crisis is much easier than solving it.

It seems that public and private-sector pensions will be less generous than they have been and that more of the responsibility for funding retirement will fall on the shoulders of the individual. For this reason, it is critical that people understand the value of accumulating supplementary savings from an early age.

A person who starts saving at 25 has to save much less per month over a working life to reach a target than someone who starts at 35. For the 25-year-old, saving $150 a month, at a 6 per cent return, reinvesting the interest at the end of each year, would produce a total of about $295,000 by the age of 65. To achieve the same nest egg by 65, the 35-year-old would have to set aside $294 — nearly twice as much per month. And if you don’t get around to saving until the age of 45, you would have to put aside $630 a month to generate that same $295,000 by retirement age.

Of course, for most people, the capacity to save gets greater as they get older, but the point is that compound interest needs time to work its magic.

Even Albert Einstein was impressed by the way the returns stack up over time. The great scientist was reputed to have said: “Compound interest is the eighth wonder of the world. He who understands it, earns it ... he who doesn’t ... pays it.”

The more people who appreciate these financial facts of life from an early age, the better the retirement experience will be for future generations of seniors and the less stress there will be on the pensions and social welfare systems.

It is another good reason why personal finance should be taught in schools as a mandatory subject, as this newspaper has argued before.

Younger generations would at least be armed with the right information to make good financial decisions and would never be able to say: “I wish someone had taught me that at school.”