Secondary pension: no good time for it to start
THERE will never been a good time to bring in a secondary pension scheme, the president of Employment & Social Security has admitted, as the committee prepares to go back to the States with some changes to its original plans.
The original proposals for YIP – Your Island Pension – were approved by the States in February 2020.
Under it, all employers have to offer their staff a pension scheme, although employees are not obliged to take it up.
Among the criticisms of the concept when it was approved in 2020 was the extra financial burden on employers would be passed on to consumers and that it could lead to employees paying out about 30% of their annual salary through payments to the new scheme, social security and income tax.
But ESS president Deputy Peter Roffey said that if something like this was not introduced and adopted by employees, there would be a lot of pensioner poverty in the future causing a strain on the funding of welfare payments.
Only about 35% of employed people between the ages of 16 and 65 in Guernsey and Alderney were reported as saving into a private pension in 2017.
‘It wouldn’t make sense to me to say that we already encourage lots of people through tax breaks to take out occupational pensions, but for the 70% who don’t, this is not the right time to extend it to them as well,’ he said.
‘But of course there’s never a good time to bring this in. If we’d tried to bring it in in 2008 we would’ve been told that the credit crunch was not a good time. If we tried a few years later we’d be told that zero-10 was in operation. Then there was Brexit, then there was the pandemic and now we’ve got the Ukraine war.
‘A good time to bring it in is always 30 years ago.’
The main change being proposed is that YIP becomes a private trust, rather than being managed by a governing board.
Sovereign Trust is set to be the trustee of the scheme, with Ravenscroft providing investment management services.
If the policy letter is approved, it is proposed that the draft law will be presented to the States in the third quarter of this year and the secondary pension obligations for employers will come into force in October 2023.
