pre-funding social pensions in Bermuda

At least some residents of Bermuda, a wealthy self-governing British Overseas Territory in the North Atlantic Ocean, with a tiny population of 63,779, are worried that government has not saved enough to pre-fund its noncontributory old-age pension promises. Benefits as of 2015 were US$103.81 a week for residents aged 65 and older with total annual income greater than $4,000 and US$106.83 a week for residents with less income. Additional requirements are citizenship and at least 10 years of continuous residence in Bermuda in the past 20 years.

The source of this information is the always useful US Social Security Administration’s publication Social Security Programs Throughout the World: The Americas, 2015. The information is very interesting, as it appears that Bermuda has a universal pension, albeit one that varies slightly with income. I might be wrong, so will look more closely into the eligibility requirements for a social, noncontributory pension in Bermuda.

Governments, the last resort for individual social care, worry about oldster statistics, periodically posting their concerns … for actuarial estimates of their unfunded pension liabilities.

Globally, in my humble experience, it is extremely rare today to read of any government, state, municipality, or commercial entity that has fully funded social pension programmes.

Martha Myron, “Retirement: what are your concerns?“, Royal Gazette, 22 April 2018.

Ms Myron, when referring to “fully funded”, no doubt includes pre-funding of noncontributory social benefits. I do not understand the need to pre-fund any government expenditure. There are an increasing number of older people in the world, but there are also many pre-school children. No country, to my knowledge, pre-funds any future expenditure on public schooling. Where is the concern, why is there no outrage for this total failure to pre-fund future spending on public education?

Commercial entities should pre-fund their pensions, as private companies can become bankrupt. Countries do not go bankrupt, so do not need to pre-fund their pension promises. If they want, they can issue debt and deposit the IOUs in a bank vault, but this is an accounting device, not pre-funding in any meaningful way.

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