Ministerial Statement by the Premier and Minister of Finance, The Hon. David Burt, JP, MP:
Mr. Speaker, in accordance with section 9(2) of the Ministers and Members of the Legislature (Salaries and Pensions) Act 1975, this morning I have tabled the Ministers and Members of the Legislature Pension Fund (MMLPF) Actuarial Valuation Report as at 31 March, 2017 in this Honourable House.
The Ministers and Members of the Legislature Pensions Fund (MMLPF) was established on April 1, 1988. The purpose of the Fund is to provide retirement pensions for the Ministers, Members and Officers of the Legislature of Bermuda in accordance with the Act.
Mr. Speaker, It should be noted that when the Ministers and Members of the Legislature Pension Plan was established in 1975 there was no separate fund established. Contributions were paid into and benefits were paid from the Consolidated Fund of Government. On April 1st, 1988 the MMLPF was established and from that date contributions were paid into and benefits have been paid from this Fund.
Mr. Speaker, the most significant events disclosed in the Actuarial Valuation are as follows:
- The value of assets of the MMLPF as at March 31, 2017 was $12.5 million the same as in 2014 when the last review was conducted;
- The actuarial liability for the MMLPF was $26.9 million compared to $23.1 million in 2014; and $4.4 million for the Consolidated Fund compared to $6.9 million in 2014;
- The unfunded liability was $14.4 million as at March 31, 2017 for the MMLPF compared to $10.7 million in 2014; and $4.4 million for the Consolidated Fund compared to $6.9 million in 2014.
- The ratio of pension assets-to liabilities, or funding ratio, for the MMLPF was 46.5% as at March 31, 2017 compared to 53.9% in 2014.
Although the Fund is currently in an underfunded position other vital fundamentals are relatively positive. For instance, the value of assets in the Ministers and Members Fund on March 31, 2017 was just over $12.5 million, roughly nine times more than the annual projected payout of some $1.4 million in pension benefits.
Honourable Members are aware that currently Members contribute a total of 12.5% of payroll and the Government contributes 12.5% of payroll. The current level of contributions is less than the cost of pension benefits being earned. The combined rate of 25% will fund 79.9% of the benefits accrued. Since no contributions are made to pay off the unfunded liability in the MMLPF, the funded status of the MMLPF can be expected to deteriorate.
Honourable Members will recall that on June 27, 2014, the automatic Cost of Living Adjustment (COLA) increase was suspended for pension recipients under this act, until such time as the sustainability of the MMLPF has been improved. Honourable Members are advised that this change improved the sustainability of the Fund.
Mr. Speaker, the Ministry of Finance is currently in the process of further reviewing the provisions of the MMLPF to ensure its sustainability, and will seek further actuary advice in formulating a funding strategy for the Plan.
Thank you Mr. Speaker.