Second pension will overcome challenges

In different circumstances, the Your Island Pension scheme, approved by the States in 2020, would already be operational. Now it is hoped to start next year – at a time of rising inflation, with the States seeking to take more tax from individuals through various routes, Brexit, Covid, Ukraine war, and associated pressures on prices and the pockets of local families.

No wonder that now there’s a hint of resistance to the proposals, and Deputy Roffey understands it.

‘Of course there’s never a good time to bring this in. A good time to bring it in is always 30 years ago,’ he said.

There are implications for both employee and employer from the introduction of Your Island Pension. Soon all employers will have to offer staff a pension scheme. Employers will immediately take a 1% hit on salary costs, rising to 3.5% over the years as total contributions rise to 10%.

Some businesses won’t welcome that extra financial pressure, but their contribution towards this long-term pension saving – and currently two-thirds of islanders have no private pension arrangement – is essential to its success.

Evidence from the UK, where a similar scheme was introduced a decade ago, has shown that more people engage with such a pension ‘top-up’ if they realise they will lose an employer contribution if they don’t.

While employees can back out, the default enrolled position is likely to lead to less drop out. UK evidence shows that less than 10% will do so.

It is likely that the secondary pension scheme will move smoothly through its next stage in the States. Employers will have already been aware of the oncoming responsibility.

It is also welcome to see a local company win the contract to operate the scheme. Guernsey’s pensions industry is relatively low key but now quite a significant part of the island’s financial services sector and it is good to see this reflected. The chosen company is already looking for more staff to run the scheme.