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Statement given by the President of the Committee for Employment & Social Security

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Tuesday 29 January 2019

General update

Sir, I am pleased to take this opportunity to provide an update on the status of some of the Committee for Employment & Social Security's work streams.

First, I'd like to refer to the Supported Living and Ageing Well Strategy, SLAWS. And I have to admit that we've made rather heavy weather of this. We are required by States Resolution to report back with recommendations on a re-priced scheme under which the long-term care insurance fund pays for the cost of care, but not the cost of accommodation and living expenses. We are also required to report back on investigations into the scope of the long-term care insurance fund being extended to cover care in people's own homes. And lastly, we are to keep under review whether there is a strategic long-term financial need to include capital assets in any means-testing of benefits associated with long-term care, and if so, whether there should be any capping of care costs.

We have undertaken a great deal of work. We know a great deal about the current provision of long-term care and the profitability, and in some cases lack of profitability, of the existing care homes. It is certainly a mixed picture. We need those care homes and they need us, as the great majority of their income comes from long-term care benefits. We keep close contact with the care homes at staff level and need their input and commitment to the solutions that we will propose.

The simplest solution for sustainability would be to increase the contribution rate and to leave everything else much the same. But contribution increases are probably also on their way for other things, including health benefits and the basic old age pension. And we expect individuals and employers to soon be contributing to secondary pensions as well. The underlying cause for all of these increases is of course our changing demographic and the balance between those of working age and those retired. We are very conscious that if the solution to everything is to increase contribution rates, we risk putting an unfair load on our younger generations. We acknowledge that retired people with sufficient income do pay health and long-term care contributions, but many do not, even though they may have substantial capital assets by way of their homes. And we also acknowledge that the long-term care insurance scheme was introduced on the principle of protecting the family home for inheritance. We are faced with a number of unpalatable choices - and formulating a process that is fair to all is proving very difficult - just as it was 2 decades ago. The Committee doesn't want to approach the States until it has something that stands a chance of success - at the moment this is some way off - but we will finalise proposals and bring them to the States in the course of this year.

Next, I would like to talk about the progress we have made with Secondary Pensions. In 2016, this States Assembly agreed, in principle, to proceed with the development of a Secondary Pensions Scheme that will have a positive financial impact on individuals and the wider economy over the longer term. Members will recall that at the heart of this policy was a proposal to establish an auto enrolment system, which was similar in many ways to the policy that has been in place in the UK for some years. This will improve pension provision by establishing an enrolled-by-default position for the majority of the working age population.

Since 2016, the Committee has made good progress in developing the outline proposals. This has led to some revisions of what was originally envisaged. Most notably, we have moved away from the idea of using the Social Security contribution system to collect secondary pensions. Our preferred approach, which will be detailed in a Policy Letter this year, is to implement a system where employers will make the secondary pension contributions from themselves and the employees direct to the Fund Administrator. This change provides advantages, while also avoiding some significant operational challenges which were identified with the former collection method. Allowing the Fund Administrator to collect secondary pensions contributions means that the administrator will be able to receive and invest contributions more quickly, and in some cases the provider may be able to offer a greater variety of contribution arrangements than could be facilitated in a scheme where funds were collected by the States. Entrusting the provider to collect secondary pensions directly and to become involved at this earlier stage in the process is expected to result in better case management, creating a scheme more sensitive to personal specifications.

Finding a suitable pension provider is a key decision, ultimately for the States. A tendering exercise commenced last summer, and we are still in the process of evaluating the shortlisted bids. After a great deal of work, we believe that we are close to the conclusion of this phase. The secondary pension will be an individual's own personal pension, maintained through a reputable provider. Over time it will increasingly supplement the State pension to give improved financial security in retirement. It will also help the long-term sustainability of our public finances by reducing the burden that would otherwise fall to income support if personal pension provision isn't in place.

The project is running behind its original schedule. But I want to assure the Assembly that the development of the secondary pension system is at the top of our priorities, alongside our equally important work on Disability and Equality legislation.

Staying with pensions, this is an opportune time to remind everyone that we are now less than one year away from the start of the increase in the qualifying age for the Guernsey old age pension.

A person who reaches 65 on 1 January next year will not immediately receive their pension, but instead will have to wait 2 months until 1 March 2020. The same goes for anyone else reaching 65 between 1 January and 31 October 2020. They will all wait an extra 2 months. People reaching 65 from 1 November 2020 and 31 August 2021 will have to wait 4 months beyond their 65th birthday before receiving their pension.

A similar sequence of pension age increasing by 2 months every 10 months will continue until pension age becomes 70 in 2049.

In the next couple of weeks, we will be writing to everyone who, according to our records will reach 65 in 2020 and who, again from our records, we know will be entitled to a pension. We will be explaining to those people when they will be entitled to receive their pension.

Now, I would like to share the current position regarding a replacement for the former reciprocal health agreement that we had with the UK, as I know many people are keen to hear progress on this work. Over the past couple of years, the Committee has considered a wide variety of insurance-based options which aimed to provide a level of cover for those who struggle most to obtain medical insurance for travel to the UK. Unfortunately, despite this extensive research and consultation with insurers, none of the options that we've considered would be suitable for meeting the population's needs. This is due to the expense, complexity and cover limitations that were offered by insurers.

Since my last update to the Assembly, representatives of the Committee have met with visiting officials from the UK's Department for Health and Social Care, on the possibility of establishing a new reciprocal health agreement between Guernsey and the UK. The meeting was positive, and the UK representatives were receptive to our island's concerns. We recognise that the UK's priority is Brexit at this time, and that health agreements with other European countries is part of that picture. We also recognise that a new Reciprocal Health Agreement would come at a cost, which would need to be acceptable in the eyes of Health & Social Care and the States, as well as to ESS.

Meanwhile, it remains important to provide a solution for those who are unable to obtain medical cover for travel to the UK at a reasonable cost. So we are determined to find a temporary solution that will provide a basic level of protection for those people.

The Committee will be proposing that an in-house scheme is created as an interim measure. It will be made available to those who can provide evidence to show that, despite making proper attempts at obtaining insurance independently, they have not received quotes for insurance at a reasonable cost. This will meet the responsibility that the Committee has to islanders in line with the aims of the October 2015 Fallaize Amendment, to safeguard the interests of those genuinely unable to obtain cover through alternative means, but without placing an excessive burden on the taxpayer.

The Committee is still working out the full details of the policy, which will be discussed with the Policy & Resources Committee and the Committee forHealth & Social Care in due course. We aim to bring a Policy Letter to the States with the full proposals in the next few months. I hope that this provides some reassurance to Members, and to the public, that the Committee continues to work on this as a priority.

Finally, I must mention the huge success of the implementation of the SWBIC proposals. We are now 6 months into the Income Support system, which replaced supplementary benefit and the social housing rent rebate systems. The staff at Wheadon House continue to work hard to ensure that transitions are implemented as smoothly as possible. The Committee is grateful for their ongoing hard work and sustained effort in ensuring the success of the project.

Sir, this concludes my update statement. I now welcome any questions.

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