Secondary pension debate could be delayed six months
STATES members will continue debate today over whether to delay a debate on secondary pensions by six months – or whether to continue to debate it and possibly confirm its long-awaited introduction.
After nearly three hours of discussion on Employment & Social Security’s proposals to introduce a secondary pension scheme for islanders – known as Your Island Pension – Deputy Carl Meerveld laid a sursis which proposed to delay the debate until after the tax review has been completed. If approved, his sursis will mean the issue goes back on the agenda in November.
ESS member Deputy Steve Falla urged members not to support this move, citing the work done by officers and the widespread acceptance of the proposals – and their timing – by employers’ representative bodies on the island, which had been consulted.
Deputy Simon Fairclough described the suggested delay as ‘reactive rather than proactive government’ and said, following much discussion from other members as to whether a delay would ‘kick the can down the road’, that the sursis was trying to ‘build the road before kicking the can down it’.
An attempt was made to curtail the debate on the sursis but this failed on a recorded vote. Members were still discussing it when the afternoon session ended at 5.30pm, so they will continue today.
Introducing the policy letter on the introduction of the scheme, ESS president Peter Roffey had argued that there was never a good time to introduce such a scheme, as it would inevitably take money out of the economy, with the benefits only being seen in future decades or even future generations.
However, he said any encouragement to save had the same effect but was pursued anyway, as it was universally regarded as a good thing to do.
The scheme would greatly reduce pensioner poverty, and reduce the burden of future income support payments, he said, and would also ensure future pensioners had greater spending power.
‘The grey pound will really help the health of the economy in years to come,’ Deputy Roffey said.
He apologised for a delay in bringing the proposals to the States but said this had had the benefit of the States now partnering with local pensions provider, Sovereign.
Auto-enrolment aspect of the scheme was highlighted as key, because it would overcome the inertia of people not engaging with savings schemes, even when it was demonstrably in their own interest.
The introduction of an opt-out system in the UK had led to only 10% deciding not to be involved, though a majority having had no occupational pension before it was introduced.
‘We expect something very similar here, but I stress it is 100% optional,’ Deputy Roffey said.
‘They are absolutely free to opt out if that’s what they want to do.’
Making the scheme compulsory, as in Australia and Sweden, was seen as being ‘over the top’, he said.
‘Roughly 70% of islanders are heading towards retirement with no pension provision at all other than their state pension,’ Deputy Roffey warned.
‘Frankly, that’s the recipe for widespread poverty with large-scale welfare spending.’
He said there was never a good time to bring in such a scheme, ‘or rather, there’s always a perfect time, and the perfect time is always 20 years ago’.
This point was picked up by former Treasury & Resources minister Lyndon Trott.
He admitted he would struggle to live on a States pension, which currently stands at £12,200 a year.
‘Deputy Roffey tells us – and he’s quite right – there is never a good time to introduce a measure of this nature.
'I think he’s right, but I cannot genuinely think of a worse time in the last 40 years.’
Inflation, at its highest level for 30 years, was his principal concern. The most recent RPI figure of 2.7% was the highest quarterly measure of inflation in Guernsey since September 1990 and double-digit annual inflation has been predicted for the UK.
Deputy Trott feared that take up of the scheme would be reduced if launched at a difficult economic time, as islanders would not want to lose income.
Deputy Liam McKenna agreed that many islanders did not have enough money to do anything other than opt out.
Deputies Tina Bury, Heidi Soulsby and Lindsay de Sausmarez all stressed that the scheme was going to be slowly phased in from October 2023 and over a period of 11 years.
The move to delay the debate by six months, made by Deputy Meerveld, will continue to be discussed today. It was seconded by Deputy Andrea Dudley-Owen.
