BERMUDA-Government seeks to assure public sector workers that their pensions will be protected.

HAMILTON, Bermuda, CMC – The Bermuda government has given an assurance to public officers who are employed and eligible to retire on March 31 next year that the lump-sum cash amount will remain protected if they continue in service.

“Whether you retire a year later or many years later, you will not receive less than that protected amount,” Premier David Burt said. He added that his government believes this is the right way to carry this important reform forward by strengthening the Public Service Superannuation Fund for those who depend on it, while making adjustments to ensure that the public service can retain the experience it needs.

Burt recalled that last September, he brought legislation to Parliament to stabilize the Public Service Superannuation Fund, noting that its 2023 valuation showed only thirty-seven cents in assets for every dollar owed in pensions. Without reform, its invested assets were projected to be exhausted around 2045.

Burt said that after years of review and consultation with unions, his government made the tough decisions to change contributions, retirement ages, and the reference wage for retirement.

“That reform was for the officers serving today, those who will join them and those who have already retired. After more than a decade without an increase, we also legislated a 10 percent increase for public service retirees, effective from April of this year.

“Payments are expected to begin in October, including arrears back to April 2026. We have taken responsibility for the Fund’s long-term future, but we must also listen to the people affected as the reforms take effect,” Burt added.

He said public officers had warned that a sudden reduction in the lump-sum conversion factor could bring forward the retirement of people who still want to serve. Burt said that the government listened, discussed their concerns with union representatives, and consulted the Public Service Superannuation Board.

“Today…I am pleased to announce a major change in how this part of the reform will take effect: the reduction in the lump-sum conversion factor will be phased in, and the cash amount available on 31 March 2027 to officers employed and eligible to retire on that date will be guaranteed if they remain in service. Let me explain why that change was needed and how it will work.

“When a public officer retires, they may choose to exchange part of their annual pension for a lump sum paid upfront. The lump-sum conversion factor determines how much is paid for the portion of annual pension they give up.”

Burt said that the significance of this provision is clear from the choices public officers make at retirement. He said between 2020 and 2025, approximately 1,000 members retired from the public sector, and 90 percent chose to receive some level of lump-sum payment. For most retiring officers, the lump-sum conversion factor directly affects the cash available to them as they begin retirement.

“For more than four decades, the lump-sum conversion factor was fixed in legislation at 11.5. It stayed at that level even while the Fund’s financial position deteriorated. That fixed figure imposed costs the Fund could no longer responsibly carry.”

He said leaving that provision untouched would have undermined the reform Parliament passed to secure public officers’ pensions, adding that it was therefore changed so the lump-sum conversion factor could be adjusted following an actuarial review and consultation with the Public Service Superannuation Board.

Burt said the government’s actuaries have said that if the lump-sum conversion factor were changed to match the funded status of the PSSF, it would need to move from 11.5 to 5.75 in April 2027.

He said the government had to consider what Bermuda would lose if experienced officers felt pressed to retire next March.

“When a teacher leaves a school, pupils and colleagues feel the loss. When a long-serving officer retires, a department loses years of knowledge and guidance. A wave of departures across the service would be felt by the public as well.”

But said as a result, the lump-sum conversion factor will remain at 11.5 on 1 April 2027; it will not fall to 5.75. Required changes will instead be phased in over time, alongside the other pension changes Parliament approved last year.

Burt said the Minister will review the lump-sum conversion factor every two years in consultation with the Board, to reach a level that reflects the Fund’s financial position by 2035.

He said the second decision protects public officers who are employed and eligible to retire on 31 March 2027, adding that if they continue serving, the cash value of the lump sum they could have received on that date will be protected until they retire, regardless of what the lump-sum conversion factor may be in the future.

“If their later calculation is higher, they will receive more. The guarantee is for that cash amount, not the 11.5 lump-sum conversion factor for future years. This government will bring the necessary amendment to the Public Service Superannuation Act 1981 to give that guarantee the force of law,” he added.

Burt said officers not yet eligible to retire on 31 March 2027 will still benefit from a gradual transition, adding, “they will have more time to understand how the changes may affect their own retirement”.