PEOPLE may be able to work longer in return for a better state pension. The Social Security Department will consider allowing people to defer taking it at 65 in favour of an enhanced payment later in life.
The concept has high-level support within the States Policy Council and could assist the island in planning for old-age provision.
The number receiving the old-age pension is expected to double by 2040.
Social Security minister Mary Lowe said the idea was one of a number of that were being looked at and things were still in the early stages.
‘We have tentatively spoken about it and we will be looking at it further in the not too distant future.’
Health and Social Services minister Peter Roffey told the States last week that it was vital for the island to focus on the core issue of pension provision if it was to avoid poverty among pensioners.
He raised the concept of working past 65 and deferring a pension in return for improved payments.
This concept is known to have support from Chief Minister Laurie Morgan, an ex president of the former Social Security Authority.
‘I have been saying for years that people really must not rely on the basic state pension to keep them in their old age,’ he said.
‘Most people have a higher expectation of lifestyle now and my personal view is that people should be able to work beyond 65 and keep on paying contributions to get an enhanced pension at, say, 68 or 70 - something to give people some sort of choice.’
Deputy Lowe added that a pension scheme was not a tax scheme and should not be looked on as a way of raising revenue.
The Confederation of British Industry is recommending that the English retirement age be raised to 70 in exchange for a bigger state pension. This would help low paid workers and reduce the need for means testing.
Deputy Lowe said that the Guernsey Insurance Fund was not solely reliant on pay-as-you-go contributions to fund current pension payments.
Since the States’ compulsory scheme was set up in 1965, it has produced an operating surplus in most years and accumulated substantial reserves of about £330m. These reserves produce their own capital growth and also an investment income, which in 2003 was £10m.
Every five years, Social Security receives an actuarial report from the Government Actuaries Department of Great Britain. This makes a prediction of up to 60 years, which takes into account estimates of the increasing number of pensioners, increasing life expectancy and the worsening ratio of workers to pensioners.
A total of 12,500 people currently receive a Guernsey old-age pension - £130 a week for a single person and £200 for a couple, well ahead of UK rates - but the number is expected to double by 2040.
Deputy Lowe said the situation was nothing new and the island was now entering the years when the number of pensioners would grow rapidly. From 2040, it was expected to level out.
A long-term view was needed and the department did not want to build something that was not sustainable. The amount by which the contribution rates for individuals and employers would have to increase to pay for the extra pensions would depend on the continuing strength of the economy, the number of imported workers and whether pension rates were kept in line with RPI.
Article posted on 3rd August, 2004 - 12.00am
Loading ...
Most Commented: