Employer and employee pension contributions
Occupational/personal pension schemes
The Department has reviewed the social security treatment of pension contributions. Pension contributions made by an employer towards a personal pension scheme will be treated in a similar way to contributions made to an occupational scheme. This follows a similar change made by Income Tax.
Employee pension contributions - no change
Employees pension contributions deducted from an employee's earnings are made net after social security liability is calculated on the value of gross earnings. This has been the position since the earnings related scheme began in 1979. In Guernsey salary sacrifice schemes do not reduce the employee's liability to pay social security contributions.
Employer pension contributions
Employer's pension contributions are treated as a benefit in kind. Social Security usually adopt a similar treatment of benefits in kind as Income Tax who from 1 January 2011 have amended the rules on employer pension contributions. From this time a cap of 25% of relevant earnings is applied to the value of an employer pension contribution for Proprietary Directors and Proprietary Employees only. Social Security has decided to treat employer pension contributions in the same way as Income Tax. As long as the employer contribution is an ordinary contribution, no liability will arise as a benefit in kind.
Change to old age pension from 2014
The Social Security Department has written to all men who, according to their records, are currently living in Guernsey or Alderney and who will reach 65 years of age in 2014.
The letter is a reminder that, when they claim old age pension, they will receive the single person rate of pension. If they are married, there will be no additional pension paid in respect of a wife under 65 years of age.
In 2003, on recommendation from the Guernsey Social Security Authority, the States decided that the increase of a man's old age pension in respect of a wife under 65 should stop. This was part of an overhaul of the social insurance law to achieve gender equality. The States decided that there should be a 10 year lead in to this particular change. With a little over 3 years remaining before the change takes effect, the Department has sent a reminder to the first year-group that will be affected.
Increases of pension for a wife under 65 that are already in payment at the end of 2013 will continue beyond 1 January 2014, until the pensioner's wife reaches 65 and is assessed for pension in her own right.
Since 2004, all women reaching 65 now have their pension entitlements based on their own contribution records (age 65 is the current pension age, please see the table below for the planned pension age increases due to take effect from 2020). The pension for a woman who was married up to 31 December 2003 is calculated using 3 different approaches below and she will be paid at the highest of the 3 rates
- The first approach takes account of just her own contribution record (which is sometimes better than her husband's)
- The second approach takes account of her contribution record between leaving school and the year in which she was married and also her own record from 1 January 2004 to the week in which she reaches 65. Then for each year from the year of her marriage to the end of 2003, she can be allocated 62%* of the average number of contributions that appear on her husband's contribution record.
- The third approach takes account of her own contribution record between leaving school and the year in which she reached 20 and also her own record from 1 January 2004 to the week in which she reaches 65. Then for each year from the year in which she reached 20 to the end of 2003, she can be allocated 62% of the average number of contributions that appear on her husband's contribution record.
These are complicated matters to explain, but the calculations are very routine for the Social Security Department. The important thing is that the best outcome for the pensioner is always used.
* 62% relates to the proportion of a husband's pension that a married women received under the pre-2004 rules.
Increase in pension age from 2020
At their July 2009 meeting, the States approved an increase in pension age from 65 to 67 commencing in 2020.
Although the States have not yet approved the detailed legislation, Social Security are issuing the table below to show how they plan to phase in the increase in pension age.
Your date of birth
Your pension age
Year in which pension first paid
1 Jan 1955 to 31 Oct 1955
65 years and 2 months
1 Nov 1955 to 31 Aug 1956
65 years and 4 months
1 Sep 1956 to 30 Jun 1957
65 years and 6 months
1 Jul 1957 to 30 Apr 1958
65 years and 8 months
1 May 1958 to 28 Feb 1959
65 years and 10 months
1 Mar 1959 to 31 Dec 1959
1 Jan 1960 to 31 Oct 1960
66 years and 2 months
1 Nov 1960 to 31 Aug 1961
66 years and 4 months
1 Sep 1961 to 30 June 1962
66 years and 6 months
1 Jul 1962 to 30 Apr 1963
66 years and 8 months
1 May 1963 to 29 Feb 1964
66 years and 10 months
1 Mar 1964 onwards
Social Security DepartmentSocial Security Department, Edward T. Wheadon House, Le Truchot, St Peter Port, Guernsey, GY1 3WH, Channel Islands
Tel: +44 1481 732500 Fax: +44 1481 732501