The Bermuda National Pension Scheme (the Plan), while brilliant in conception and as currently in force, is not meeting the needs of older workers in our public workforce during this unprecedented decline in economic job activity in Bermuda.Here’s why:The Bermuda National Pension Scheme distribution regulations, established for public employees outside of the Government domain, appear overly restrictive and inflexible when compared to the generous lump sum distribution allowed at retirement for Bermuda Government civil servants and ministers. Under the Government Superannuation plan, 25 percent of a government employee’s final pension accumulation as a defined benefit (based upon final average years of salary) can be taken in a lump sum, accompanied by a smaller monthly annuity payment for life.In contrast, the Bermuda National Pension Plan regulations do not allow any lump sum distributions (excluding excess voluntary contributions) from an individual’s Pension Plan accumulation at designated retirement age of 55, 60, or 65.Additionally, you, as an individual, cannot access your money - with an emphasis on your - without converting the entire pension accumulation into a irrevocable annuity.Bermuda public domain working individuals, who have accumulated pension assets under the Plan, are (may be) facing significant family challenges before they can even begin to contemplate retirement under today’s uncertain economic conditions, with continuing job losses reported yesterday.The largest challengeThese families need cash. Their assets are illiquid (i.e. locked up in pensions, low market value domestic company shares, and immovable real estate).As anecdotally evidenced, many soon-to-be (STBRs) retirees still have mortgages on their personal residence. Or, they have guaranteed the mortgage for a younger family member. What patriarch or matriarch could refuse helping their children acquire a home?Some STBRs have been made redundant or forced into earlier-than planned retirement. Those that must continue to work past retirement age are finding the stress of securing another job amplified by the prospect of losing their home.Other STBRs retirees may be supporting redundant family members or have been called on to supplement generational education costs, as well as basic living necessities. STBR individuals who counted on rental, investment savings, dividend income to supplement their eventual retirement, are coping with rent vacancies and less than stellar portfolio results. The result: full retirement will be pushed off as long as possible, until cash flow accumulations can be replenished.STBRs want better access to their retirement portfolio. The feeling is that this is their money, they are mature individuals with demonstrated financial competence, and they should be able to decide how to use their money to the best advantage.There are other cash rationalisation provisions that the Bermuda Pension Plan does not currently accommodate, but should be seriously considered in the revision process:l An individual is not allowed to borrow up to 50 percent of his/her accumulated pension, as is allowed under US pension plans;l An individual is not allowed to withdraw irregular larger sums as needed, but has to stick to the monthly-for-life annuity (US plans have more flexibility);l An individual with more than $40,000 (according to one pension provider) in an accumulated pension is not allowed to choose a five- or ten-year term certain annuity, thereby being able to push up considerably the amount of monthly distribution cash available.l An individual is not able to choose the drawdown option for his/her pension due to the high balance limitations imposed, thereby discriminating against retirees who’d like the option of continuing portfolio market appreciation for a few more years. Exceptions may be made if the individual has other retirement means but the between-the-line assumption here is that the soon-to-be-retiree has other retirement income for self-sufficiency.Selecting the drawdown option, if an individual qualifies under the present regulatory structure, means exposing your pension portfolio to market and volatility risk as it applies to all your assets. The tradeoff is that your pension drawdown option has the opportunity for continued growth, while an annuity converts your pension into a fixed amount that will return the same amount for the rest of your life.This commentary may sound like criticism of the Pension Act. It is, but then, could the proponents of this plan ever have anticipated the dependency of employees on the evolution to the business-restrictive Bermuda economic environment that is on the present horizon? I think not. It appears that they, too, back in the day thought rents, dividends, private savings, full and part-time work into retirement (if the individual wanted to do so) would continue without any difficulty, with the new pension augmenting the retiree lifestyle.Next week: We take apart the various pension annuity options, and discuss the drawdown option in full. We also address the disclosure responsibilities of your pension provider, the insurance company selling you your pension annuity, and your responsibility role in the decision process to do your very best to understand fully your Bermuda National Pension Structure.Full disclosure means the following, for example, in the United States under the FINRA (Financial Industry Regulatory Authority) notice 96-86 addressing suitability requirements for clients:l Not only must the insurance representative assure that the client demonstrates an understanding of what is being sold, but what product is being purchased.l There must be reasonable grounds for the recommendation of an annuity based upon the client’s investment objectives, financial situation, and needs.l Other items of note that play a role in the annuity decision making process are the customer’s ability to fully appreciate how much of the purchase payment is allocated to cover insurance or other costs, and the customer’s ability to understand the complexity of annuity products, generally.Cross border cautionUS citizens ( and dual US citizens with Bermuda, Canada, UK etc), green card holders, US residents for income tax purposes must now report their Foreign Financial Assets, i.e. foreign pension funds, mutual funds, foreign life insurance, and many others above certain aggregate thresholds for the 2011 Tax Filing year.Please see links below for Part 1,2, and 3 or visit www.marthamyron.com for the full pension articles with comparison charts that cannot be viewed electronically online at the Royal Gazette website.