Protecting the National Insurance Fund for future generations is at the centre of a proposal by the Treasury to introduce a Manx Pension Guarantee.
The measure, if approved by Tynwald, would mean that the Manx State Pension would rise annually from April 2025 by either the preceding September’s figure for Manx CPI inflation or 2%, whichever is higher.
The move follows the publication of a report in October which indicated that, without intervention, the Fund — which currently stands at £1.09 billion — would be exhausted in just over 20 years' time, by 2047/48.
The majority of pensioners in the Isle of Man will be unaffected as they retired before the introduction of the Manx State Pension and will continue to see their Retirement Pension increase in line with the UK and its ‘triple lock’ policy.
Implementing this change would therefore only affect those who reached state pension age after 5 April 2019. The impact, however, will ensure the Fund is sustainable and sufficient to cover future expenditure on benefits and pensions.
Details of the proposal are contained in a report published on the Tynwald Register of Business ahead of next month’s sitting: Future Uprating of the Manx State Pension.
The value of the Fund is also addressed in the report, with Treasury proposing that it should never fall to less than twice annual expenditure.
Treasury Minister Dr Alex Allinson MHK said:
‘Driving this change is the need to preserve the National Insurance Fund for our community into the future. It’s about intergenerational fairness, and accommodating the needs of today’s children and grandchildren.
‘Tynwald Members were clear when the matter was debated in November that workers and businesses should not be forced to bear the burden of paying increased contributions to the Fund. Equally, the need for pensioners’ income to rise by an amount that reflected the cost of living in the Island was also essential.
‘By introducing the Manx Pension Guarantee, pensioners will benefit from the certainty of knowing that their income will rise each year to match changes in the cost of living. They will also know that the Fund will remain in a healthy and sustainable condition, and is able to provide both for their pensions and for those who retire in the future.’
The principles behind the Fund will continue to be reviewed every five years by the UK’s Government Actuary’s Department. The next review is due to take place in 2027, with a report published in 2028.
How the change will affect pensioners in the next financial year
Pending Tynwald approval of next month’s Budget measures, from April, the Manx State Pension, which is paid to those who reached state pension age after 5 April 2019, will rise in line with the Manx Pension Guarantee. It is currently £241.50 a week and will increase by 2.2% (reflecting September 2024 Manx CPI inflation) to £246.75 a week from 7 April 2025. This equates to an increase in annual income from £12,558 to £12,831.
The Retirement Pension will continue to rise each year in line with the UK’s ‘triple lock’ policy and affects the majority of pensioners in the Isle of Man. It is currently £169.50 a week and will increase by 4.1% to £176.45 a week from 7 April 2025. This equates to an increase in annual income from £8,814 to £9,175.
Background – Isle of Man pensions
- Pre-April 2016: Up until 6 April 2016 the Isle of Man followed the UK on state pension legislation as this was a requirement of the Social Security Reciprocal Agreement between the two parties. From 6 April 2016 the Isle of Man and the UK entered into a new reciprocal agreement that meant that the Island no longer had to follow the UK on state pension legislation. However, this only applied to people who reached state pension age on or after 6 April 2016; the IOM was therefore still required to revalue pensions awarded prior to this date by the same amount as the UK. The result is that this group of Island pensioners currently have the ‘triple lock’ formula applied to their pensions
- 6 April 2016 to 5 April 2019: From the 6 April 2016, the UK introduced a new single-tier state pension. The Isle of Man did not introduce any changes and continued to calculate the state pension in the same manner as it had done for those who reached state pension age before 6 April 2016. While the Isle of Man is free to revalue pensions awarded between 6 April 2016 and 5 April 2019 differently from the UK, the Treasury has chosen to continue to revalue them by the ‘triple lock’ formula. It should be noted that the ‘triple lock’ does not apply to the whole pension an individual is paid but only to the basic amount; this applies to all pensions awarded prior to 6 April 2019
- Post-6 April 2019: With effect from 6 April 2019 the Isle of Man introduced its version of the UK’s single-tier pension, known as the Manx State Pension. Again the Island was free to revalue this pension as it chose to and since its introduction it has been revalued by the ‘triple lock’ formula. It is now proposed that the Manx State Pension is no longer revalued by the ‘triple lock’ and instead, from April 2025, will be increased by the Manx Pension Guarantee — the higher of either Manx CPI (referenced to the previous September) or 2%
