Secondary pension to hit tax take
A THIRD of the island’s population could be automatically enrolled for a private pension under new reforms being put forward by Employment & Social Security.
But the move is expected to hit consumer spending, as islanders contribute up to 6.5% of their income to the scheme.
The secondary pension scheme is expected to start in 2020 and will see working age islanders in Guernsey and Alderney enrolled automatically, although they will be able to opt out.
It is estimated that 20,200 islanders will be auto-enrolled into the scheme and that about 20% will opt out. But that still means 16,200 people will have the opportunity to save for a private pension scheme as a direct result of these reforms.
The majority are expected to be automatically enrolled into the States-facilitated scheme, although some will be automatically enrolled into alternative private pension schemes via their employer, as long as it meets a qualifying scheme test.
Once the scheme is fully established, employees will contribute 6.5% of their salary, with employers contributing 3.5%.
It is anticipated that employers who do not currently offer a pension scheme will, in most cases, incur additional administration expenses which are expected to be primarily time costs rather than monetary.
Policy & Resources Committee president Gavin St Pier said it was also anticipated that the move will reduce income tax revenue.
Employment & Social Security president Michelle Le Clerc said the old age pension was only ever intended to provide a basic platform level of retirement income.
‘The projections show that, with the introduction of the proposed auto-enrolment system, an income replacement rate of about 80% can be achieved,’ she said.
‘We are pleased to see that this exceeds the target rate as recommended by the UK’s Pension Commission.’
A tender document has been produced to find a provider. Once a company has been chosen, the proposals are expected go to the States later this year.
Full story in today's Guernsey Press
