Pension fees set to be lowered and capped, Premier says
Pension administration fees are set to be reduced and then capped, the Premier told MPs yesterday.
David Burt, who is also the Minister of Finance, said that from April 1 next year a new fee structure would be put in place with limits “so they do not increase in the future”.
He told the House of Assembly that the National Pension Scheme (Occupational Pensions) Act 1998, through the National Pension Scheme (General) Regulations 1999, allowed plan administrators to charge fees and expenses for the administration of pension plans.
“However, there are no limitations on the amount, or rates, that can be charged,” the Premier said.
He explained that in December 2019, Section 69 of the Act was amended to empower the finance minister to prescribe maximum fees payable for pension plan administration.
“Following a comprehensive review by the Pension Commission in 2021, and with the assistance of a leading Canadian pension consultancy firm, it has become clear that there is a significant variability in the fees paid by plan members, in defined contribution pension plans, with some fees as high as 4.2 per cent.
“Recognising the significant impact that higher fees can have on the final pension balances accumulated by Bermudians, we have taken steps to address this issue.
“Therefore, as of April 1, 2025, the Ministry of Finance will implement limitations, or caps, on plan administration fees, which will result in substantial benefits for pension plan members, leading to larger amounts that Bermudians will have to support their retirement.”
For those in defined contribution employer pension plans, also known as group retirement plans, the fees should not exceed:
• 1.25 per cent per year for members with balances above $50,000
• 0.75 per cent per year for those with balances between $25,000 and $50,000
• 0.5 per cent per year for those with balances of less than $25,000
For those in individual local retirement plans, the fees should not exceed:
• 1 per cent per year for members with balances of more than $50,000
• 0.75 per cent per year for those with balances between $25,000 and $50,000
• 0.5 per cent per year for those with balances of less than $25,000
Other changes, Mr Burt said, will also require pension plan administrators to include lower-cost investment options, such as index funds, in their range of investments and prohibit “an administrator from receiving advisory fees on any investment funds offered to plan members”.
“With these changes it is estimated that the average annual savings for individuals with balances over $50,000 will be $725, and with projected future interest rates will amount to over $75,000 in additional funds for retirement over a 40-year employment cycle.
“For members with smaller balances, the average annual savings are estimated at $125, totalling over $14,000 over the same period.
“This initiative is a clear example of our government's dedication to safeguarding the financial wellbeing of our people.
“By limiting the administration fees deducted from their pension funds, we are ensuring that more of their hard-earned money is preserved for their future benefit, helping to secure a safer and more prosperous retirement.”
Mr Burt said the move had been made possible “thanks to the collaborative efforts of the Government, Pension Commission and local pension plan administrators”.
“The people of Bermuda will benefit from not only a reduction in administration fees applied to private pensions but also see limits put in place on those fees, so they do not increase in the future.”
• To read the Premier’s statement in full, see Related Media
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