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Pension Scheme Valuations

Public Sector Pension Scheme Valuations

Valuation   31 March 2013

Valuation   31 March 2016 

Valuation 31 March 2019

Every three years an actuarial valuation of the public sector pension schemes is undertaken by the PSPA to establish what the actual experience has been, how the assumptions may have changed and therefore the ongoing impact on the future cost of pension schemes. An actuarial valuation aids our understanding of how schemes have evolved, analyses member experience, and primarily establishes the cost, based on various assumptions about the future, of past service benefits and also looks at the cost of providing future benefits.

The report shows:

  • The liabilities of the schemes accrued to date – called the past service liabilities, shown in £000’s;
  • The contribution rates required to fund the future service benefits of each scheme and section of each scheme, shown as a percentage of Pensionable Pay;
  • Scheme membership data;
  • The various underlying Financial and Demographic assumptions used to calculate the results.

2019 Valuation Headline Results

  • Long term cost of benefits for all schemes has fallen from 27.8% of pay to 27.5% of pay
  • Long term cost of benefits for the Unified Scheme has fallen from 27.1% of pay to 26.7% of pay
  • Past service liabilities have broadly stayed the same from £2.34bn in 2016 to £2.31bn
  • The projected cashflow position of schemes has improved over the next 25 years due to higher overall contributions and lower projected benefits.

The actuarial valuation is based upon various assumptions such as future long term interest rates, economic growth, inflation, salary growth, scheme memberships and mortality, as agreed with the PSPA and Treasury. The assumptions are therefore the actuary’s best estimate of the future position. Over time, assumptions can and will change, therefore future results will also change.

2016 Valuation Headline Results:

  • Long term cost of benefits for all schemes has fallen from 28.8% of pay to 27.8% of pay
  • Long term cost of benefits for the Unified Scheme has fallen from 28.6% of pay to 27.1% of pay
  • Past service liabilities have risen from £2.06bn in 2013 to £2.34bn in 2016
  • The projected cashflow position of schemes has improved over the next 25 years due to higher overall contributions and lower projected benefits.

Looking at the Cashflow position, you will see that the expenditure on benefits in the long term is projected to be lower due to changes in actuarial assumptions (lower projected long term salary growth in particular) and also the impact of reforms to the Unified Scheme from April 2017. Contribution income was also higher as Government now pays a 15% contribution across the board for its scheme member employees whilst member contributions for the Unified Scheme will increase by a further 2.5% from April 2018. However, this is offset by the impact of lower projected future salary growth which means lower projected contributions. 

Isle of Man Government Unified Scheme 'Cost Envelope'

When looking at the position of the Cost Envelope in the Unified Scheme, the fall in the long term cost of benefits for the Unified Scheme over the three valuations, from 28.6% of pay, to 27.1% and now to 26.7% of pay in 2019 is in line with expectations and the work undertaken on the Cost Envelope taking into account current actuarial assumptions. The very long term cost of the Unified Scheme is expected to fall to 23.5% of pay when the scheme comprises of new members only in Section 1, which also reflects the expectations and the work undertaken on the Cost Envelope taking into account current actuarial assumptions. 

Isle of Man Government Accounts 

It is important to note that the numbers in the Valuation will not be the same as the pension costs stated in the Government accounts (the Blue Book). Primarily, the “Discount Rate” assumption will often be different. This is because the methodology used for the valuation of pensions in corporate/Government accounts (and in particular, the derivation of the Discount Rate) is prescribed by law under the relevant Financial Reporting Standard, in this case called FRS 102. This tends to place a much higher value on the Scheme liabilities. However, the methodology agreed by the PSPA and figures produced by the PSPA’s actuaries for the purposes of the three-yearly valuations are used for funding, reviews and pensions accounting purposes, in the same way as they would also be for private sector defined benefit pension schemes. The PSPA reviews its valuation assumptions every three years in consultation with the Treasury.

Public Sector Pension Scheme Reforms 


In 2014 Tynwald passed a motion that expressed concern over the continued rising cost and liabilities of public sector pensions and called upon the PSPA to undertake a valuation of the schemes and report back to Tynwald on the feasibility of implementing further cost sharing and other measures, to reduce the long term liability and provide for a sustainable and fair pension scheme. A Working Group was duly set up and its findings produced the Public Sector Joint Working Group Report – Fairness and Sustainability along with supporting documents.

Since then, public sector pension schemes have been reformed as follows:

Isle of Man Government Unified Scheme 2011

The Unified Scheme reforms have been implemented from April 2017 (benefits) and from 2018 (contributions). Tynwald Members are now part of the Unified Scheme and are paying higher contributions (10%, rising to 15% of pay over the term 2016 – 2021 Keys term), with new Tynwald Members also paying higher contributions (10% of pay) in return for 20% lower benefits. 

Teachers’ Superannuation Order 2011

Reform implemented to future pension benefits for existing and future scheme members from 1 April 2018.

Police Pension Regulations 1991 and 2010 

Reforms have been implemented for new members from April 2018. 

Judicial Pension Scheme 2004

Reforms have been implemented which were to close the scheme for new members from April 2020 and increase contributions up to 11% for existing members. New members to the Judiciary will join Section 9 of the Unified Scheme which has generally lower benefits.  

Cost Sharing for all Schemes

Cost sharing is the process by which future cost increases under public sector schemes based on agreed actuarial assumptions will be shared between Government and scheme members. A Cost Sharing mechanism is now in place for the Unified, Teachers and Police Schemes. More information on can be found on the Cost Sharing page of this site. 

Future plans for managing the Public Sector Pension Legacy 

At its March 2019 sitting, Tynwald considered the Cabinet Office Report entitled 'Public Sector Pensions - Legacy Funding Update: A Second Cabinet Office Report (GD 2019/0014) (The Report)'. 

One of the recommendations that Tynwald approved was to direct the PSPA to: 

'establish a voluntary Defined Contribution pension scheme by 31 December 2020, as an alternative to the current Defined Benefits Schemes following an assessment with Treasury of the possible cost implications on the current schemes, and that if implemented, it will be offered to all future new public servants and also, (subject to cost implications) to any current public servants who wish to move into that scheme'.   

Tynwald also noted that:

'the PSPA will seek approval from the Treasury at the appropriate time for a suitable budget to research, establish and fully communicate the option of a new Defined Contribution pension scheme to public servants with the assistance of suitably qualified pension and communication specialists'.

Work is ongoing and the new Defined Contribution Scheme is due to be introduced for new employees from 1 April 2022.

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