Meetings discuss future of state pensions and benefits

Monday, 9 March 2015

Feedback generated at a series of open meetings this week will help to shape a public consultation on the future of state pensions and benefits in the Isle of Man.

Treasury Minister Eddie Teare MHK says he is encouraged by the level of community engagement on an issue highlighted as being ‘of the greatest national importance.’

Nearly 200 people attended meetings in Douglas, Ramsey, Port Erin and Peel to discuss ways of reforming the social security system to ensure its future sustainability.

Minister Teare and Malcolm Couch, Treasury’s Chief Financial Officer, outlined the challenges facing the Island, explaining that our current arrangements are simply not affordable in the longer term.

Their presentation focused on a report by consultants Ci65 who are proposing a ‘bold transformation’ of the system to make it meet the Isle of Man’s needs.

As well as contributing during the open question and answer sessions, members of the audience had an opportunity to provide their views via Powervote keypads.

The feedback will be used to inform a public consultation, which will be launched later this month, with the aim of taking a policy recommendation to Tynwald in July.

Minister Teare said: ‘How to reform the Manx system will be one of the most important decisions to be made since the introduction of the welfare state. The Ci65 report says our current arrangements are out of date, have not kept pace with the ageing population, are based on UK policies rather than local priorities, and have become far too complex. It is clear that action is needed. Doing nothing is not an option and we must put in place measures that will protect our children and grandchildren.’

He added: ‘I was encouraged by the constructive input from the audiences during our four meetings. I think people understand the need for change and offered some positive suggestions and helpful observations. We will now review that feedback and come back with a consultation document to get a steer on the way forward. No policy decisions have yet been made and because we are so close to these issues fresh ideas from the public are most welcome.’

State pensions and most benefits are paid out of National Insurance contributions. The meetings heard that spending is now outstripping what Government receives in contributions, with the NI Fund forecast to run out by 2047. The Minister said the proposals focused on managing claims on the NI Fund and that he had no intention of increasing NI contributions.

The Ci65 report suggests a flat-rate state pension of about £180 per week, built up over 45 years, with a minimum qualifying period of 10 years before any pension rights are obtained. People would retire later and pensions would increase each year in line with average earnings.

Dr Couch stressed that existing pensioners will be largely unaffected by any reforms, adding that if a decision is made to remove the Manx pension supplement it would be phased out over a 20-year period.

He said: ‘Any changes should be simple and fair for everyone and competitive for our economy. We may need to consider some form of compulsory savings scheme for retirement. The state pension was never meant to be income replacement in retirement.’

A simplification of the benefits system is also recommended by Ci65 to make it more responsive to the needs of the Isle of Man. The consultants are proposing a new Manx benefit, a means-tested basic amount based on who lives in a household, with additions to cover specific needs such as disability, sickness or maternity.

Minister Teare said: ‘We want to achieve a simpler, faster, more transparent system that supports those in need, but provides a guarantee that people will be better off in work than on benefits.’

He added: ‘The presentations really challenged people with some radical ideas and it was interesting to hear their responses and see how they voted. These issues are of the greatest national importance and I would urge people to take part in the forthcoming consultation and help inform Government’s decision-making process.’

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