A new law to enable fundamental changes to be made to the public sector pension scheme (Public Employees Contributory Retirement Scheme, or PECRS) will be lodged today.
The proposed changes to the scheme follow a major review which aimed to provide a sustainable, fair and affordable scheme for the future.
The central proposal changes the scheme from one which is calculated on the final salary of employees to one which is based career average earnings. The proposals will also:
- Link the normal retirement age with the Jersey state pension age
- Treat all employees equitably
- Introduce a contribution cap for employees, the employer and taxpayers
- Share the risk between the employer and employee
The Chief Minister, Senator Ian Gorst, said that over the past year there had been regular productive meetings with the Joint Negotiating Group (JNG) who negotiate pension provision for States employees, to consider all aspects of the proposals, including changes to retirement age and the phasing of contribution increases.
The unions that make up the JNG will now consult their members on the proposals.
Senator Gorst said that the need for change was driven by a number of factors, including the increase in general life expectancy, the need to reflect the way a modern workforce live and work and unfairness between different pay groups.
“We are closing down an unaffordable, outdated final salary pension scheme and replacing it with a fairer, more sustainable career average scheme. The employer’s contribution to the pension scheme will be capped.
“The scheme strikes a balanced deal between public sector staff and the taxpayer – ensuring that States staff continue to have good pensions, while taxpayers benefit from greater control over their costs.
“Across the world, governments are having to consider the sustainability and affordability of their pensions systems – the same is true of Jersey. This is a comprehensive reform which will make the public sector pension scheme sustainable and affordable, in the face of rapidly rising life expectancy,” said Senator Gorst.
The Treasury team leading the work on the proposals will now focus on the regulations which will provide the detail of how the scheme will operate, including:
- The protection of accrued rights
- Accrual rates
- Contribution rates and caps
- Normal and optional retirement ages
The regulations will be debated by the States Assembly later this year and it is hoped that the scheme will be implemented from January 2015.
Category: Finance & Business