ESS proposes above inflation increase for States pension

Proposals were published yesterday to put up the full States pension by £13.09 a week from January – to £280.32, which works out as nearly £14,600 a year.

Employment & Social Security president Peter Roffey said his committee’s proposals were in line with a new pension uprating policy agreed by the States last year and would be supported by Policy & Resources.

‘The committee is proposing that the rate of the States pension and all other contributory benefits funded from the Guernsey Insurance Fund are increased by 4.9%, which is 0.4% more than the rate of core inflation for the year to June 2024,’ said Deputy Roffey.

If the proposals are agreed by the States next month, expenditure on the old age pension, which is paid to just over 19,000 current and former residents of the island, is expected to exceed £176m. next year, an increase of nearly £40m. since 2021.

The same increase of 4.9% to other contributory benefits – which include sickness, unemployment and bereavement payments – would take overall expenditure from the Guernsey Insurance Fund to nearly £208m. in 2025.

The policy letter from ESS also proposes another increase to social security contribution rates, as part of a 10-year plan to boost the fund’s income as pension costs escalate.

Employees would see their contribution rates raised to 7.4%, employers to 7% and the self-employed to 12.2%.

The increases are expected to raise additional revenue of about £5.4m. a year.

The upper earnings limit – after which no social security contributions are paid – would be increased to just over £188,600 a year.

The policy letter also stated that ESS would soon submit to the States two major reports on the funding of the island’s social security schemes.

One will propose moving some social security contributions from lower-earning households to higher-earning households, which the committee believes can be done without additional funding from the States’ general revenue budget.

The other will include short-term proposals on the contribution and benefit rates of the Long-term Care Insurance Fund, which pays towards the cost of places in residential or nursing homes.

Two other committees – P&R and Health & Social Care – recently backed out of a tri-committee plan to propose radical changes to the island’s long-term care model, after the new senior committee elected in December decided to defer the issue until a tax review next term.

‘It is important that the long-term care scheme’s benefit rates accurately reflect the rising costs of care provision given the importance of maintaining the robustness of the private care sector,’ said Deputy Roffey.

‘The committee is considering a range of proposals, including a wider review of the rates payable to care homes and the approach to future uprating of the benefit rates to align with the true costs of delivering long-term care, as well as options for improving the sustainability of the fund.’

ESS also published the latest figures about SOHWELL – Supported Occupational Health and Wellbeing Programme – which aims to reduce sickness absence and keep people in work or help them return to work.

‘This has transformed the way we approach work rehabilitation by focussing on occupational health and early intervention to help sickness benefit claimants identify pathways back into work,’ said Deputy Roffey.

‘The SOHWELL team has reported a 120% increase in the number of people undertaking a gradual return to work after illness or injury when comparing calendar years 2022 and 2023.

‘In addition, numbers of new long-term sickness benefit claims have reduced by 40% during the first 30 weeks of 2024.

‘This represents cost avoidance, in terms of benefit expenditure, of between £11,000 and £20,000 per week.’