Tynwald Members will be asked to approve the transfer of £5.2 million to Government's revenue account from the Public Service Employees Pension Reserve.
The need for additional funding is the result of an increase in the number of staff taking early retirement or deciding to opt out of the public sector and to transfer their pension entitlement.
Net expenditure on public sector pensions for 2014-15 was £58.4 million, against a budget of £26 million. The transfer of £27 million from the Public Service Employees Pension Reserve (PSEPR) was approved by Tynwald during the Budget process in February. Treasury will call on the July sitting of Tynwald to support the transfer of an additional £5.2 million in order to balance the revenue budget.
Treasury Minister Eddie Teare MHK explained:
'The number of public sector staff taking early retirement has increased over the last four years as Government continues to restructure and to streamline its workforce. Voluntary redundancy and resignation schemes have been effective in enabling employees, including many senior managers, to retire or leave service early. This has resulted in a significant payment of lump sums during the past financial year, particularly in the final two months. These payments are in line with pension entitlements accrued under the rules of each scheme.
'It should be noted that higher expenditure on pensions is only one part of the equation. Substantial cost savings have been achieved in terms of our salary budget, as Government is now employing fewer public servants.'
He added:
'Treasury has the power to sanction this transfer of £5.2 million without Tynwald approval, but I want Members to be fully aware of the situation and have an opportunity to express their views. The bigger picture is that we need to reform both public sector and state pensions to make them more sustainable for future generations and to provide confidence that our pension liabilities can be met.'
The Public Service Employees Pension Reserve was established by Treasury in April 1994 to receive the pension transfer values of incoming employees. It is also used to fund the transfer values payable to outgoing employees, lump sums payable to retiring employees, the ongoing costs of pension administration and the implementation of the Government Unified Scheme, and the emerging pension liability.
Treasury figures show an increase in the number of members deciding to opt out of public sector schemes close to retirement and transfer their benefits to personal pensions. Transfers out of the PSEPR fund in 2014-15 were £6.55 million, compared with just over £4 million the previous year.
This total is expected to fall in future after legislative changes were approved by Tynwald in January to provide the Public Sector Pensions Authority with greater control over the circumstances in which staff can transfer out of schemes.
Minister Teare said:
'The approval being sought at July Tynwald is needed to address a short-term cash flow issue. Looking to the future, Tynwald must make some important decisions on the reform of public sector and state pensions, as well as Members' own pensions.'
