More cash allocated to cover pension debt

Sunday 22 October 2017

Jersey's Treasury Minister has allocated a further £140,000 to help cover the costs of a States’ pension debt which was estimated at £264m in 2015, and is expected will take 82 years to pay off.

The debt is linked to a pre-1987 States’ pension scheme deal.

The background is explained in a report compiled for the minister: “The Pre-1987 Scheme was created in 1987 as a result of changes proposed to Jersey’s public sector pension arrangements. Public Employees Contribution Retirement Scheme (PECRS) took on the liability for paying increases accrued in respect of services prior to 1987. The increase could not be funded by the States and created a liability in pensions. To eliminate that liability the States agreed that from 1 January 2002 the employer’s contribution rate of 15.6% of pensionable earnings would be split into 13.6% to cover the cost of future benefits and 2% would be allocated to paying off the Pre-1987 Debt.”

The problem in paying off the debt is that repayments are hard to calculate because they are influenced by factors such as pay awards, incremental increases and re-organisations.

Since January the States have based their repayments on an average pay rise of 2.5% - but the average rise has been much higher: 3.6%.

As a result the total budget allocated for the PECRS pre-1987 Debt in 2017 was £7,308,012 against an updated forecast of £7,447,920, leaving a shortfall of £139,908. The transferred money will help plug the difference.