Pensions in Jersey

I’ve been looking through the Social Security Department report 2017, and there are some fascinating statistics in it.

A fact well cited is that women live longer than men, and the case is certainly true in Jersey where the female to male ratio slowly increases with age, reflecting the fact that, on average, women live longer than men. Of the 331 pensioners aged 95 or over, 255 (77%) are female.

At present some women continue to have a pension age of 60, if they were registered for Social Security purposes before 1975 – despite the fact they live longer.

But living longer means people will need to work longer as well.

Old Age Pensions amount to £179.4 million in 2017, supporting 31,880 pensioners. That’s fast approaching 1/3 of the Island’s population, although it should be noted that not all pensions are paid locally. If people have paid their contributions, and move abroad, they are still quite rightly entitled to a pension.

The current pension age is 65, with an option to take a reduced rate pension up to two years early. In 2014 the States passed legislation to increase the pension age in Jersey from 2020, with the pension age rising by two months per year, increasing the age from 65 to 67 by 2031.

Just over three-quarters (£179.4 million) of Social Security benefit expenditure is in respect of old age pensions. This cost is growing year on year as the number of pensioners increases. At the end of 2017 there were 31,441 pensions in payment. There has been an 8% increase in the number of pensions paid between 2013 and 2017 and an 9% increase in the rate of the pension leading to an overall increase of 16% in the total cost of pensions over this time

So despite reporting on a currently healthy Reserve Fund, the actuarial review also clearly demonstrates the need for the ongoing major review of the Social Security scheme.

The number of people aged 65 and above is due to rise by 65% between 2015 and 2035. Even with an increase in state pension age, the extra annual cost to be met in pension payments by 2035 is roughly £100 million (in 2015 prices).

Acknowledging these future challenges, the Department is undertaking a major review of the Social Security Scheme. The first part of the scheme review was a public consultation during 2016 and these results were published in May 2017. That consultation had over 1,300 replies and there was clear support for the old age pension to be maintained in its current form.

There was little support for a means tested pension or for the value to be reduced in the future. Respondents understood the pressure that the cost of pensions will put on the Fund and agreed that savings could be made in other benefit areas and that contributions may need to rise.

The alternative is to "time shift" the demographic time bomb by boosting immigration, which will eventually lead to an even greater imbalance as that population itself ages - as has been noted, that strategy bears all the hallmarks of a Ponzi scheme.

The consultation also explored how well prepared people were for supporting themselves financially in old age. Many people reported that they had made little or no provision for this and were supportive of the government providing extra support, perhaps through a compulsory workplace pension scheme.

The UK has grasped this nettle, and introduced a compulsory workplace pension scheme. Isn't it time Jersey followed suit?