A report on public sector pensions has recommended a further increase in contributions from Government staff and a doubling of the rate paid by Members of Tynwald.
The report, entitled ‘Public Sector Pensions – fairness and sustainability’, has been produced by a working group headed by Policy and Reform Minister Chris Robertshaw MHK and is due to be debated at the December sitting of Tynwald.
Mr Robertshaw commented:
‘At a time when Government is addressing the long-term sustainability of the state pension, it is only fair that we revisit this aspect of public sector pensions – to ensure that the system has a viable future and that it does not place an undue burden on the public finances. Tynwald Members are not exempt from this process of re-examination.’
The report concludes that the new Government Unified Scheme (GUS) introduced in 2012 - while successful in streamlining the system, making it more sustainable and establishing local control - has not achieved all the savings expected when it was designed six years ago.
GUS brought together 15 schemes previously tied to the UK and required increased employee contributions from many public sector groups.
The working group says its new proposals would need to be subject to full consultation. But if implemented they could substantially reduce the ‘funding gap’ between scheme income and expenditure, and prolong the life of the Public Sector Employees Pensions Reserve Fund for at least the next 20 years.
Recommendations include:
- For current GUS members: a 3% increase in contributions phased in over three years; raising the minimum retirement age from 55 to 58; consideration to be given to taxing lump sums above £200,000; amending the definition of final pensionable pay;
- For new GUS members: a 3% increase in contributions for a similar level of benefits to be provided only on later working; capping of future pension increases;
- For Police, Teachers and Judicial Schemes, the next stage is to discuss with these groups the introduction of similar reforms to those proposed for GUS in respect of future service and new members whilst also considering phasing out the direct link with UK equivalent schemes;
- For Tynwald Members: member contribution rate to increase from 5% to 10% for newly elected Members and to 15% for current Members choosing to retain a similar levels of benefits; reduce dependent’s pension from 75% to 50% of member’s pension; move the scheme to a statutory basis to put it on the same footing as other schemes, and put its governance under the Public Sector Pensions Authority (PSPA).
The working group has considered closing GUS membership to new employees, but says the unfunded scheme needs a flow of new members to maintain income. It has also discounted switching GUS from a final salary to a career average basis, which it says would actually increase benefits and costs in the circumstances of the Isle of Man public sector.
The report can be found on the Cabinet Office website at /media/1346225/copensionsworkinggroupreportfinalnov2014.pdf
