The proposal is one of many in an amendment – nicknamed the Fairer Alternative – to this week’s Funding and Investment Plan.
The proposal has unsurprisingly been criticised by the public sector unions and the RSEA (Retired States Employees’ Association).
Pictured: Deputies Heidi Soulsby, Sasha Kazantseva-Miller and Gavin St Pier have proposed the ‘Fairer Alternative’.
Meanwhile, Policy and Resources has stayed fairly quiet on the proposal, despite the Funding and Investment Plan being its policy letter. It’s understood that some members of the Committee concurred with the concerns raised by the unions, but no official statement was made.
P&R has now broken its silence after seeking advice from the independent actuaries – BWCI Consulting Limited – responsible for valuing the fund.
“The Policy & Resources Committee has sought advice from the public sector pension scheme’s independent actuaries on a proposal to suspend employer contributions to the scheme for three years,” said the Committee.
“The advice warns strongly against such action, and that the latest estimate for the scheme (pending the full valuation due at the end of 2023) is that it is currently around 89% funded.”
It has also published BWCI’s assessment of the situation.
“The Fund’s assets have underperformed over the period since the 2020 valuation (against the investment return assumed for the 2020 valuation) which has caused the funding level to deteriorate significantly,” the letter states.
“The funding level is estimated to be 89% as at 31 August 2023, equating to a shortfall of around £194m.
“There is no longer a funding surplus available to support a contribution holiday.”
Pictured: P&R Treasury Lead, Deputy Mark Helyar.
The Treasury Lead for P&R, Deputy Mark Helyar, has taken the opportunity to comment on the situation. His statement is published in full below:
“It’s clear Amendment 4 is not a credible or workable solution. We appreciate that will be disappointing to those members who prepared it. The Committee had invited them to discuss any proposed amendments as early as possible ahead of the debate this week, but as they chose not to, the Committee was not able to share the latest information on the fund’s valuation.
“Even before this clear advice from the actuary, the Committee could not support the amendment. It is not a sustainable solution, it puts the funding of public sector pensions at risk, and does nothing to stabilise the financial position of the States and could end up costing the taxpayer more. It is unethical and irresponsible.
“This week’s debate is crucial to the future of Guernsey’s public finances, but also to its wider economy and quality of life. It is important the debate focuses on credible solutions. This amendment is an example of tinkering with unworkable solutions to try to patch up looming financial problems, and an unwillingness for some members to acknowledge three years of detailed work and expert advice. The States must bite the bullet and broaden our tax base in a calm and considered way that retains our competitiveness and reduces the tax burden for the poorest in society.”