Senators have warned that Bermudians should tread carefully before taking money out of their pension funds for emergency purposes.

The National Pension Scheme Amendment Act 2010 was passed yesterday in the Upper House.

It allows Bermudians in need to gain access to part of their private sector pension money before retirement.

Eligible residents must be unemployed for at least a year and be struggling to pay for their homes, medical treatment or their children's college education.

Independent Senator Walwyn Hughes yesterday stressed the plan was not a "silver bullet that is going to pay off your debts".

However he acknowledged that there was "nothing worse in this economic climate" than when people couldn't pay off their medical bills or children's education.

He applauded the amendments for providing help in such emergency cases but cautioned: "Be careful for those using the scheme not to deplete your long-term pensions.

"There is no doubt about it that taking money out of your pensions is not the ideal thing to do.

"The fact is most people do not realise it takes a lifetime of work to create a good pension."

United Bermuda Party Sen. Michael Dunkley agreed that people need to understand the long-term effect of such a move.

"People need to understand if they take it today it is not going to be there tomorrow. Yes, there will be extreme cases, there will be emergency cases. But tomorrow will come and at the end of the day someone has to pay."

Sen. Jeanne Atherden also expressed her concerns with the scheme.

"This helps them in the short-term but we will be deluding ourselves if we did not think at the time they retire this is going to impact on the size of the pension they are going to have."

Sen. Kim Wilson, who presented the National Pension Scheme Amendment Act yesterday, said only people in dire need and without any other options could benefit from the scheme.

She compared it to a savings account in a bank and explained: "If you do not replenish that money [from the pension fund] it is gone."

She said there will be a pensions committee which will operate in a "pseudo counselling role" to inform people of the consequences.

The committee will only allow people to dig into their pensions if there is "no other reasonable way" for them to pay for health care and other necessities, Sen. Wilson added.