Renee Ming SAGE Presentation
- 1. Senator Renee Ming, JP Senator Spokesperson for Finance
- 2. Bermuda Contributory Pension Fund (CPF) ◦ The social insurance scheme into which all Bermudians contribute. Contributions and benefits set by Parliament. Public Services Superannuation Fund (PSSF) ◦ Pension Plan for employees of Government & Government Quangos. Automatic COLA increase. Ministers and Members of the Legislature Pension Fund (MMLPF) ◦ Pension plan for Government Ministers, Members of Parliament & Senators. Automatic COLA increase.
- 3. Government Employees Pre-Retirement Lump Sum Leave Benefit ◦ Government provides a pre-retirement lump sum leave (GEPLSL) benefit to certain eligible Government and quango employees upon retirement. Government Employee Health Insurance (GEHI) ◦ Government Employees and dependents are entitled to participate in the GEHI programme upon retirement. The Government pays 50% of the premium
- 4. Findings ◦ Underfunded by $2.066 Billion (August 1, 2011) ◦ On course to run out of funds by 2047 ◦ Ratio of working persons to pensioners is decreasing: 5.2 in 2005; 3 in 2021; 1.5 in 2046 Recommendations ◦ Increase contributions by 3% in excess of benefits $50,000 earner paying 3.3% of income now will pay 6% ◦ Raise age of eligibility (Retirement Age) to 68. Raise should be phased in over 15 years. ◦ After 15 years raise retirement age to 70
- 5. Findings ◦ Underfunded by $973 Million (March 31, 2012) ◦ Unsustainable & on course to exhaust funds by 2043 ◦ Offers better benefits than comparable DB plans Calculation of Benefit, Early Retirement, Survivors, COLA Recommendations ◦ ◦ ◦ ◦ Change benefit from final salary to last 5 years Raise retirement age and penalise early retirement Spouse not automatically covered; 10% option No further COLA increases. Benefit is fixed for duration of beneficiary’s life
- 6. Findings ◦ Underfunded by $23 Million (March 31, 2013) ◦ Fund is currently unsustainable ◦ Offers better benefits than PSSF Plan Faster accrual, 66% of max salary payable Recommendations ◦ Immediately Freeze MMLPF. No new entrants, no new benefits to accrue ◦ Replace with a Defined Contribution plan ◦ Reduce benefits to current beneficiaries/members Raise age to 65, no COLA adjustments
- 7. Findings ◦ At present, the Government provides a pre-retirement lump sum leave (GEPLSL) benefit to certain eligible Government and quango employees upon retirement. Recommendations ◦ The SAGE Commission recommends that the Collective Bargaining Agreements governing the payment of this benefit be renegotiated to provide the following: Determine the accrued benefit for each active employee as at a Specified Date based on the current rules and freeze the benefit to be paid to active employees when they retire ◦ SAGE estimates this would save $10 million in future cash outflows
- 8. Findings ◦ 100% Underfunded - $269.4 million (41% retirees, 59% active) ◦ At present GEHI provides coverage for employees, retirees and their eligible dependents ◦ Goverment costs up 137% over last 10 years Recommendations ◦ Fix the amount paid to retirees at current figure ◦ Cease providing health benefits for new retirees (7 year grandfathering) ◦ Retirees can stay in plan by paying 100% of premium ◦ SAGE predicts changes will save $169 million
- 9. SAGE recommends a “Glide Path” to deficit reductions. Recommends following schedule of reductions Year Amount 2014/15 $65 Million 2015/16 $80 Million 2016/17 $85 Million 2017/18 $90 Million Total $320 Million
- 10. 2014/15 ◦ Abolish all unfilled posts, reduce non-personnel expenses, reduce grants and contributions ◦ Reduce personnel Terminate poor performers Require those above age 65 to retire Incentivise early retirement Scaled reduction of salaries to meet savings target 2015-2018 ◦ Repeat cycle every year during the budget process ◦ Privatisation will not take effect for 18-24 months
- 11. SAGE acknowledges the existence of the multiplier. Every dollar reduction in spending will cause a $1.28 reduction in output (contraction) in the Bermuda Economy To meet SAGE targets with 3% revenue growth spending will need to be reduced by $235 million over 4 years from $984 to $749 million According to multiplier $301 million removed from economy Reduction of 1344 Jobs