Pensions and other contributory benefits will be increasing by 6% from next January if the States approves the Department’s recommendations. Supplementary benefit, family allowances and other taxation-funded benefits will go up by 4.7%, which is the most recent RPI figure.

'We think that many pensioners are feeling the pinch. And they're worried about charges that are on their way' says Deputy Le Cheminant. 'By putting up pensions by 6%, which is above RPI, we've gone as far as we can this year without going into deficit on the Guernsey Insurance Fund income and expenditure account.'

Benefit increases

Pensions

Single pensioners will get an extra £9.25 per week, with a full rate pension increasing from £151.50 to £160.75.

Pensioner couples will get an extra £13.75 per week, increasing their joint pensions to £241.25.

Sickness, unemployment, invalidity and bereavement benefits all go up by 6%.

Social Security want to make partial pensions directly proportionate to the contributions paid. There is some distortion in the rates at present as a result of the old Christmas bonus payment being put into the general pension rate 16 years ago. Social Security propose correcting this over a 2 year period. Whereas full, or nearly full, pensions will be increased by 6%, half-rate pensions will get 5.5% and very small pensions will get 3.1%. Social Security say that three-quarters of small pensions are being paid off-island and that there is no justification for these pensions still being supplemented by a now removed residence-based Christmas bonus.
 
Supplementary benefit

Supplementary benefit rates will generally go up by 4.7%. And an increase in the benefit limitation is proposed in the case of families, taking it from £297 per week to £367 per week. But Social Security are proposing a reduction in the rate of benefit paid to under 18s living at home. New claims will get £73.70 per week instead of the £82.90 that they are currently getting.

Fuel allowance

Social Security are recommending a 3.3% increase in the fuel allowance paid to supplementary benefit householders during the winter, taking it from £18.70 to £19.30 per week from this October. This matches the general increase in fuel prices over the last year.

Family Allowances

Family allowances will increase from £13.20 per week per child to £13.85.

Long-term care insurance benefits

Social Security recommend that the co-payment, which must be paid by people in care before any long-term care benefit is paid, should increase from £147 to £154 per week from next year. They recommend that the maximum residential care benefit should increase from £322 to £341.25 per week. Nursing care benefit is to increase from £602 to £637 per week.

Prescription charges

Prescription charges will increase by 10p, to £2.70 per item from 1 January 2008.

Contributions

High earners and their employers will see big increases in their Social Security contributions from January, as a key part of the zero-10 Fiscal and Economic Strategy takes effect.

Social Security are recommending that the upper earnings cap for contributions should go up from £53,664 per year to £64,896 per year. That will mean self-employed people with earnings of £65,000 or more paying an extra £1,179 in contributions. An employed person earning £65,000 or more will pay an extra £680 per year. A non-employed person under 65 with income over £65,000 will pay an extra £1,112 in contributions and a non-employed person over 65 will pay up to £292 per year more in contributions.

There are bigger increases in store for employers. Their contribution rate will increase from 5.5% to 6.5% of employees’ earnings and the upper earnings limit for employers will increase from £53,664 to £108,108. So the maximum amount payable by an employer will increase from £2,952 per year in 2007 to £7,027 per year in 2008.

States Grants to contributory funds

The idea behind the higher contributions is to allow a reduction in the General Revenue States Grants to the Guernsey Insurance Fund and the Guernsey Health Service Fund.   These grants are currently set as percentages of total contribution income to the Funds.  The Department has recommended that the grant to the Guernsey Insurance Fund reduce from 36% of contribution income in 2007 to 15% from 1 January 2008.  The Department has also recommended that the grant to the Guernsey Health Service Fund decrease from 27% of contribution income in 2007 to 12% from 1 January 2008.

‘The reduction in the two grants will further reduce the General Revenue payment to the Funds by £16.61m in 2008, adding to the £10m annual saving from 2007’ says Deputy Le Cheminant. ‘The combined reduction of more than £26m in 2008 is the difference between what the States grants would have been under a continuation of the insurance principle-based funding arrangements and what the grants will be under the new arrangements. It's a shift of more than £26m per year from the taxation budget onto contributors and employers. ’

Policy Council and Treasury and Resources Department comments

Social Security's benefit and contribution proposals have the full support of the Policy Council and Treasury and Resources. But there is disagreement over the amount of the States grant from general revenue that should be paid into the Social Security Funds. The Policy Council will be placing an amendment calling for a review of the method of calculating the States Grants in time for recommendations to appear in the Budget Report later this year.

The Billet d' Etat contains an exchange of letters between Social Security and the Policy Council about the grants to the Guernsey Insurance Fund and the Guernsey Health Service Fund. Social Security say that they have fully complied with what was required of them under Stage 1 of the agreed Fiscal and Economic Strategy. They say that from 2008, they will have relieved the States General Revenue Account of £27m per year of expenditure on grants to the funds. The issue between the Departments is that Social Security estimate the remaining 2008 grant to be £15.85m whereas Treasury and Resources have made provision for £13.5m.  Social Security say that T&R are making an accounting error by using a 2006 figure for 2008 without taking account of movements in prices and earnings.

Ends

Released on 6 September 2007.  Embargoed until 7 September 2007

Contact information

Malcolm Nutley, Administrator - Tel. 732581, or    
Ellen Pragnell, Manager - Legislation and Governance - Tel. 732513