Public Employees Contributory Retirement Scheme

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A decision made (07/08/2009) regarding: Public Employees Contributory Retirement Scheme - Actuarial Valuation.

Decision Reference: MD-C-2009-0055
Decision Summary Title :	Public Employees (Contributory Retirement Scheme) (General) (Jersey) Regulations 1989		Date of Decision Summary:	4 August 2009
Decision Summary Author:	Head of Employee Relations		Decision Summary: Public or Exempt? (State clauses from Code of Practice booklet)	Public
Type of Report: Oral or Written?	Written		Person Giving Oral Report:	N/A
Written Report Title :	Public Employees Contributory Retirement Scheme (PECRS) Actuarial Valuation Report as at 31 December 2007		Date of Written Report:	24 July 2009
Written Report Author:	Senior HR Manager - Pensions		Written Report : Public or Exempt? (State clauses from Code of Practice booklet)	Public
Subject: Public Employees (Contributory Retirement Scheme) (General) (Jersey) Regulations 1989 – Actuarial Valuation
Decision(s): The Chief Minister agreed to present to the States the Public Employees Contributory Retirement Scheme (PECRS) Actuarial Valuation as at 31 December 2007.
Reason(s) for Decision: Under article 3 (3) of the Public Employees (Retirement) (Jersey) Law, 1967, an actuary, appointed by the Committee of Management of the Public Employees’ Contributory Retirement Scheme (PECRS) has to regularly review the operation of the fund and make a report to that Committee (who will then pass a copy to the Chief Minister) on the financial condition of the fund and the adequacy or otherwise of the contributions payable to support the pensions and other benefits payable under the Scheme. A copy of every report produced under article 3 (3) must be laid before the States as soon as may be after it is made (Article 3 (5) of the Law). The report was signed by the Scheme Actuary on 2 July 2009 and the Chief Minister is now able to lay the report before the States.
Resource Implications: None
Action required: Senior HR Manager – Pensions is requested to arrange with the States Greffe for the Report to be presented to the States at the earliest possible date.
Signature:		Position:
Date Signed:		Date of Decision (If different from Date Signed):

Public Employees Contributory Retirement Scheme - Actuarial Valuation.

Report of the Chief Minister

Article 3(3) of the Public Employees (Retirement) (Jersey) Law 1967 (L.11/67) requires the appointment of an Actuary to review the operation of the Public Employees’ Contributory Retirement Scheme. Under Regulation 6(1) of the Public Employees (Contributory Retirement Scheme) (General) (Jersey) Regulations 1989 (R & O 7956) the Scheme’s Committee of Management has obtained a report from the Actuary for the period to 31 December 2007.
In accordance with Regulation 6(2) of the Public Employees (Contributory Retirement Scheme) (General) (Jersey) Regulations 1989, this accompanying report from the Chief Minister presents to the States the Actuary’s report.
The Scheme’s Committee of Management and the States Employment Board have formally accepted the report, which was signed by the Scheme’s Actuary on 2 July 2009. In particular, the Actuary has concluded that the Scheme has a deficiency.
The deficiency is £63.2m based on the provisions of the Scheme at the valuation date.

Making good the deficiency

The treatment of the deficiency disclosed at 31 December 2007 is covered by Regulation 6(3)(d) and (e) of the Public Employees (Contributory Retirement Scheme) (General) (Jersey) Regulations 1989.
The Regulation allows a valuation deficiency to be carried forward in circumstances where it appears to be of a temporary nature. However, taking into account an anticipated worsening of the Scheme’s financial position after the effective valuation date of 31 December 2007, the Employer’s Actuary’s advice is that the deficiency should not be seen as “temporary” and that action should be taken to deal with the deficiency.
The Scheme is not a conventional final salary scheme where the employers have responsibility for meeting any deficiency. In principle, a deficiency may be made good by increases to the contributions of employers, or by increases to the contributions of current or future members, or by a combination of both. However, the Chief Minister and States Employment Board have made it clear that they are not supporting an increase in the employer’s contribution rate, even though this is one of the available options.
A copy of every report, signed by the Scheme Actuary, will be laid before the States by the Chief Minister as soon as possible. If agreement is reached between representatives of the States Employment Board and the Public Employees Pension Scheme Joint Negotiating group, within three months of the Valuation being laid before the States, then the Chief Minister will present it to the Committee of Management for endorsement and to the States for approval.
If no agreement is reached and the Chief Minister and the Committee of Management have not agreed on proposals for dealing with the deficiency within six months of this report being laid before the States, in accordance with the Scheme’s Regulations, future pension increases will be restricted to a level of 0.3% per annum below the increase in the Jersey Cost of Living Index, subject to review at future valuations.
Members who are subject to the Public Employees (Contributory Retirement Scheme) (Jersey) Regulations 1967 (R & O 5010) and the Public Employees (Contributory Retirement Scheme) (Former Hospital Scheme) (Jersey) Regulations 1992 (R & O 8443) will continue to benefit from full increases in line with the Jersey Cost of Living Index as they are protected by a States guarantee.