Proposed changes to public sector pensions
Wednesday 12 December 2012
Members of the Joint Working Group reviewing pension arrangements for public sector employees have agreed proposals for the future of the schemes.
The schemes cover approximately 4,700 currently employed and 3,000 former employees including nurses, teachers, public service employees, civil servants, members of the emergency services, and employees of Guernsey Post, Guernsey Electricity and the Guernsey Financial Services Commission.
The proposals are designed to address the risks for the employer in the current final salary arrangement whilst continuing to meet the aspirations of members for certainty of income in retirement albeit only up to a certain level.
The key features of the proposals are: the replacement of the final salary scheme with an arrangement which links pension benefits to average revalued salary over a whole career; a limit of £85,000 on the amount which can count as pensionable pay in any year; linking the pension age to state pension age (currently 65 but due to increase to 67 by 2031); and an increase in member contribution rates from 6.5% to 8%. The estimated cost for the employer is 12% of pensionable pay but this is expected to reduce once all members have a pension age of 67. There will be a cost ceiling for the employer's contribution rate for future service benefits of 14% which would trigger an increase in member contributions or a reduction in benefits.
The Joint Working Group agreed the proposals at their meeting on Monday 10 December and these proposals will now be considered by the member organisations and the States of Guernsey as the employer.
The Joint Working Group was set up in late 2011 by agreement between the Public Sector Remuneration Committee (now succeeded by the Policy Council) and elected representatives of States employee organisations. Rodney Benjamin was appointed as independent chairman in December 2011. Since its formation, the Working Group has held monthly meetings to identify public sector pension arrangements that will provide public sector employees with an appropriate, guaranteed level of income in retirement, whilst remaining affordable and sustainable.
Mr Benjamin said:
"This has been a long, at times tough, but ultimately productive process, and I am pleased that a consensus decision has been reached on an appropriate way forward for the provision of public sector pensions in Guernsey".
Employees' side chairman Ed Freestone said:
"This is a proposal which represents the best solution which we could negotiate on behalf of members, and which delivers a predictable pension in retirement, which should protect staff from old age poverty".
Deputy Allister Langlois, on behalf of the Policy Council representing the States of Guernsey as employer of all public sector employees, said:
"We are very pleased that we have found common ground for a revised pension scheme which will be both sustainable and appropriate for taxpayers and States employees".
Membership of the Joint Working Group:
- Rodney Benjamin, Independent Chairman
- Deputy Allister Langlois, Policy Council nominee
- Ed Freestone, Chairman of the Association of States Employee Organisations
- Chris Torode, ASEO nominee
- Calvin Allen, Research Officer, Prospect (and ASEO nominee)
- Terry Harnden, Policy Council
- Diana Simon, BWCI, technical adviser to the Policy Council