Latest figures make pension contribution holiday idea a 'no-go', says P&R
Guernsey's public sector pension scheme is only 89% funded, and the idea of withholding employers’ contributions was untenable, Policy & Resources has said in its latest spat with backbenchers.
Deputies Heidi Soulsby and Gavin St Pier had proposed an amendment, which included a proposal to have a three-year employer contribution holiday for the defined benefit scheme part of the States of Guernsey Superannuation Fund until the end of 2026.
The pension fund had been valued in 2020 as being 107% funded.
Now Policy & Resources has spoken to independent actuaries BWCI, which stated that the latest estimate for the scheme was currently around 89% funded.
In a letter to P&R on 11 October, BWCI stated that since the 2020 valuation, long-term interest rates had risen significantly, but how that affects the pension scheme funding levels depended on a number of factors.
‘The fund’s assets have underperformed over the period since the 2020 valuation (against the investment return assumed for the 2020 valuation) which has caused the funding level to deteriorate significantly,’ the letter from BWCI stated.
‘The funding level is estimated to be 89% as at 31 August 2023, equating to a shortfall of around £194m.’
BWCI added that the States had previously agreed that when funding levels drop below 90%, additional contributions must be paid by the employer.
So if this deficit persists at the next formal valuation, employer contribution rates would need to increase.
Policy & Resources has sent the pensions advice to States members and also sought to reassure the thousands of nurses, teachers and other essential public staff, and the 5,000 retired workers.
P&R treasury lead Mark Helyar said the pension contribution holiday was not a workable solution.
‘We appreciate that will be disappointing to those members who prepared it,’ he said.
‘The committee had invited them to discuss any proposed amendments as early as possible ahead of the debate this week, but as they chose not to, the committee was not able to share the latest information on the fund’s valuation.’
Deputy Helyar said even before the BWCI letter, P&R would not have supported the proposal, which had also sparked anger from the unions.
‘It is not a sustainable solution, it puts the funding of public sector pensions at risk, and does nothing to stabilise the financial position of the States and could end up costing the taxpayer more,’ he said.
‘It is unethical and irresponsible.’
