11 April 2014
An independent review of Jersey’s Social Security Fund shows that it is in a healthy condition, with assets of £1 billion available to meet the costs of future pensions and benefits.
The fund’s strong position is the result of prudent decisions that have been made since the 1990s to protect the long-term future of the fund, into which all Social Security contributions are paid. The current contribution rate was designed to build up a surplus of five years’ expenditure, which was achieved last year. The more recent decision to gradually increase the state pension age to 67 by 2031 acknowledges the increasing life expectancy of local residents.
In the coming years the Social Security contributions paid by employers and workers will be providing pensions for a growing number of pensioners. The growth in pension costs has been predicted in previous reviews and this review suggests that pension expenditure will peak around 2042.
The Minister for Social Security, Senator Francis le Gresley, said “The pressures on the fund will grow steadily and are likely to peak some 30 years from now. The reserves that we have built up give us time to plan for these additional costs. We are in a stronger position than many other countries and the level of reserves gives us breathing space to adjust smoothly as pension costs continue to increase.”
Forecasts show action required in the future
The review, conducted by the UK Government Actuary, forecasts that by 2016 the income from contributions will only just match the cost of pensions and benefits paid out because, in common with many other countries, life expectancy and pension costs in Jersey are rising fast.
While action will be needed to address this issue, the fund’s current strong position provides flexibility as to when contributions will need to rise. Given the healthy level of reserves, the review concludes that no action is required until after the next three-year review, due in 2016.
Senator Le Gresley said: “It is no surprise that within the next few years we will reach breakeven point, when the amount of money collected in contributions will equal the amount paid out. That’s why it has been important to put prudent strategies in place which protect the future of the fund for our children and grandchildren.”