Last summer, Policy & Resources recommended to the States that contributions into the Fund from the public purse should be reduced by around £9m a year. Deputies agreed, and from 1 August the States’ contribution dropped from 14.1% of salaries to 10.3%. Contributions for the incorporated States company Guernsey Electricity reduced to 7.5%.
But the latest estimate of the Fund’s value put its total value at 86%. An interim update from the States’ independent actuaries, BWCI, which revealed a shortfall of £194m at the end of August. They assessed that its assets had underperformed since 2020 resulting in significant deterioration.
But P&R says this is within an acceptable range, and that high inflation and poor investment returns, reflected globally, are primarily to blame.
“The upcoming full valuation will provide detailed information and allow all assumptions and actual data to be updated. All scheme members will of course be updated and the Committee will consider what actions if any are appropriate and bring proposals to the States,” a Policy & Resources spokesperson said.
That valuation will take place at the end of the year, with the full details available in 2024. That will determine whether the States should increase its contributions into the pot, but P&R says this is not solely based on whether a surplus of deficit exists.
Pictured: A full valuation of the fund is taking place at the end of the year.
“The States policy around past service surpluses and deficits set an upper boundary of 120%, effectively saying that this level of surplus is sufficient to provide a cushion against future adverse experience,” the spokesperson added.
“In the event of a surplus above 120%, the Committee would make a recommendation for what to do in relation to the excess surplus. The States policy also includes a lower boundary of 90% with any corrective action being taken over a period not exceeding the average future working lifetime of the active membership (currently 15 years). The specific action to be taken would depend on several factors including the reason for the deficit.
“The agreed States policy does not propose any action is taken in relation to a deficit or surplus when it is between 90% and 120%.”
The States Investment Board manages public investments on behalf of the Policy & Resources Committee and invests the Fund to achieve good returns in the long-term
Its first ever annual report will be published shortly covering last year, which P&R say will improve transparency and will be an improvement on “the governance compared to previous practice.
“As it is the first annual report it will be published as a standalone report, but in future years it will be attached to the States’ Accounts.”