ISLANDERS are spending £21m. a year maintaining the States employees’ pension scheme and a senior minister has called for it to be closed.
Budget figures released on Friday show that while £3m. will be raised via duty hikes on fuel, cigarettes, spirits and TRP, all of that and more will be swallowed up by an extra one-off £6.9m. needed by the pension ‘pot’ next year to keep it funded.
Social Security minister Mark Dorey (pictured) said, ‘I think it is unacceptable, this increase the taxpayer has to pay to fund the superannuation fund.
‘I think the States has to look at closing the pension scheme.’
However, he said, if the States found it could not close the scheme to everyone because some people came from defined benefit schemes in the UK, then the contribution rates of those remaining in it should be changed so the employer and employee pay 50:50.
‘From now, the States is paying in 14.1% and the employee pays 6.5%, which is basically a third to two-thirds.
‘For such a highly valuable benefit it is unacceptable that the employer pays so much compared to the employee.’
The divide with the private sector situation was too great, he said. ‘I don’t think the public sector can continue giving out such generous benefits when the private sector has said they are unacceptable and are closing them.’
Excluding the £6.9m. needed this year, the annual cost is more than £13m.
Article posted on 23rd November, 2009 - 2.30pm
40 Article Comments
Great idea – close the scheme all together. Why should the tax payer pay for these cushy pensions. I say close the schemes and expect the employees to take out private pensions like the rest of us. These people have had it too good for too long. I wish someone would keep pouring money into private pensions.
Failing complete closure, then yes, the contribution ration should be 50:50 or why not make the employee pay two thirds and the States one third !
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Of course it should be abolished for all Govt type jobs and a decent state pension reinstated back to 65. How can it be fair otherwise?
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Interesting comments chaps – do you also think that the states should start paying bonuses and bupa style healthcare to come into line with the private sector? Also they should start paying for lavish Xmas balls and summer drinks on the veranda and all the other perks I enjoyed in the private sector?
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Am I correct in thinking that this is not a new problem?
Perhaps someone who is closer to this issue than me can confirm the following.
For some years the States (as the employer) froze the level of it’s contributions to the State’s Pension Scheme. As a result the employer contributions have been in deficit.
If I am correct, it is quite handy to blame “turmoil in the markets” for mis-management……
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Consider this; a person who works for 40 years will contribute more to maintain a States worker in comfort and security in his old age than he will contribute to his own pension.
Not a lot of people know this, but if they did do we really think we would be debating this issue?
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Peter
I believe you are right.
If my recall is correct this happened in the early mid 1990s.
There were some serious concerns about funding and the levels of contribution. As usual problems materialised after a positive period of growth accompanied by some very generous early retirement packages.
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Auntie GP
Not everyone in the private sector enjoys those things, and are on low wages. How do you explain to an average worker that he/she has to pay towards the public sector pension as well as there own?.
Also not everyone in finance earns big money either.
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auntie gp i don’t know where you work. but try this for size.
the firm i work for has closed its final salary pension scheme costing someone like me lots of money as i’ve worked for them for thirty years.it’s been quoted in the local press that it would be criminal to take away what has been offered to states employees in the form of pensions so it must have been criminal to take away our scheme.
this company offers no health care no drinks on the veranda and a one off free meal (partners not included)at christmas that’s it.. the point is that this organization is considered the employer of choice in it’s industry so many others are worse off. So yes I and many others feel that the pension scheme offered to states employees is too generous and frankly I don’t see why we should contribute to it at it’s current level.
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Auntie GP – the lavish Christmas balls, summer drinks, BUPA, bonuses etc… come directly out of the business (within the Private sector). Everything the States pay for comes out of the tax payers pocket. I would say this is somewhat different.
WELL SAID bcb
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Ma
Maybe just close down Guernsey
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bcb – i accept your point and my comments were an over generalisation aimed specifically at the likes of Paul Cutter who was spouting off about the issue sat in his ivory tower raking in the bonuses and the private medical cover etc I didnt hear him and the likes complaining about the states pension when them types were getting their bonuses etc – now their industry is in a mess they want everyone else to suffer. The reason people opt for civil service over the private sector is the pension and job security – which they choose to have and sacrifice the bonuses and medical care etc – that is how the civil service attract staff. Take that away and no one will work for civil service and then the island will be in a pickle!
Kevin I feel for you, that is a difficult situation, but why just because you are suffering does everyone else have to suffer? Did Civil servants shout for your pension scheme to be closed?
John – Bank staff get their freebies and lavish extras by the business – correct – but as a customer of a high street bank – i contribute to those profits through what are generally exorbitant charges and fees – i know, i worked for one and know exactly how they tick! Civil servants pay tax and SS just like the rest of you – they also administer the servuces that generate income – so its not as if all private sector employees are hemorrhaging money into the public sector pension whilst the civil servants kick back and enjoy, is it!
You think the civil service is inefficient now – take away the one thing that attracts quality staff – and see what it is like in 20 years time.
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Auntie GP, a couple of points…
“The reason people opt for civil service over the private sector is the pension and job security – which they choose to have and sacrifice the bonuses and medical care etc – that is how the civil service attract staff.”
-Maybe in current times just the job security would be sufficient to attract the candidates needed in the civil service, and therefore us tax payers wouldn’t need to support the attractive pension arrangements?
“staff get their freebies and lavish extras by the business – correct – but as a customer of a high street bank – i contribute to those profits through what are generally exorbitant charges and fees ”
- A large number of the financial institutions that have a presence in Guernsey do not have high street operations here so perhaps you are not contributing to the lavish extras at all. And if you don’t like your bank charges, why don’t you move to another bank?
This thread seems to be degenerating into the typical “bash the finance sector” thread, where anything non public sector is automatically assumed to be finance.
Paul Cutter makes valid points. Final salary schemes are being phased out globally, both in public and private sectors, due to their huge cost. Do people suggest that we blindly top up the final salary scheme for ever? If we see huge falls in the schemes assets would be put in another £20mio? Or £50mio? Or £100mio? Where do we draw the line?
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auntie GP
you still don’t get it. i’m paying into the pot for civil service pensions. They are not paying into mine.
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I think everyody is right so far (nearly anyway!).
Yes, those in the finance industry, do get reasonable perks. But generally no final salary pension or job security. The benefit for working for the States is security and the pension.
So its swings and roundabouts. And of course all those in between.
The really concerning thing for the Island, UK, world is that when the forty somethings and younger come to retire they will not have sufficient cash/pension to support themselves.
The end is nigh!
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Greg – in response to your points. Yes, I think you are right, maybe the job security would be enough – although even that is being called into question since the reviews into the way the island is ran. A job for life could be a thing of the past for the civil service. You are right, alot of them dont, but they are all benefiting from Zero 10 which is being propped up with my tax contributions, as well as yours. At a time when everyone is calling for solidarity in the work place – I do not see all the bankers and financial institutions not giving bonuses and not giving free xmas do jollies – so what right do they have to request that civil servants give up their pension? Personally, it doesnt effect me what they do – but I am fed up of private sector bigshots calling for the 1 payday civil servants have – just because their sector have had their cake and eaten it – and my slice and your slice and any other slice they could possibly eat.
Kevin I do get it. I realise what you are saying, but you have choosen to work in your field, and when you signed on you agreed to a package, now that package has been taken away without your agreement and that hurts, but that is not the issue. Yes, you are contributing to the pension of public servants and that is what tax is about. Let me put it this way – it would cost you a lot more money then it does now if everything was privatised – education, policing, healthcare the works – imagine the costs of each of those, i think you would prefer the public services. So, that means it is vital to have public services, to have public services we need public servants to perform those services. The reason we can attract to that public service and keep them from going to the shiny lights of bonus bonanza’s and free medical cover etc is with the knowledge that one day when they are old and wrinkly, they will have a nice pension to live off of. The civil service are constantly advertising for staff, for those of you that dont like what you have now in terms of an employment package an application form could be just a call away.
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Auntie GP, I don’t think anyone is calling for the scheme for exisiting employees to be scraped, are they? This would definitly be wrong. I thought it was just for new entrants, hence my comments on it being interesting to see if the civil service would still be attractive in these times without the amzing pension.
As for bonuses and “Xmas jollies”, I think a lot of Guernsey banks paid little or no bonuses last year. It will be interesting to see what happens this year, because the areas the banks have been making huge profits are areas that are not traditionally carried out in Guernsey. “Xmas jollies” are often also used as good ways of getting big organisations together, and as a thank you to staff who generally don’t get decent size bonuses.
I think with this topic there may also be some resentment at the perceived way that the civil service wastes tax payers money.
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Auntie GP,
Very good post, particularly with regard to ALL of us being taxed to death to support the zero-10 scheme.
To those employed in the higher echelons of the finance industry, how can you moan at having to prop up the Civil Service pensions when you are (or have been) pocketing large bonuses, cheap mortgages, health schemes and goodness knows what other perks for years?
States employees don’t even get a mince pie at Christmas let alone a free meal, their only perk is a decent pension (even this is compulsory, you have to pay around 6% of your wages in whether you like it or not) some of these people are earning well under £20K a year but are still paying increased taxation to support the finance sector as everyone else has to.
For the record I don’t work in finance or the States so I would hope my opinion is reasonably unbiased.
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Greg – there are those that are asking for the scheme to be closed to new and existing entrants. I dont think the states have the bottle to close to existing entrants, besides im sure the contracts are pretty tight. If it closes to new entrants now, yes the current unstability will lead to the states being an attractive offer – but what about when stability is back in the private sector – if a graduate can go to a bank and earn £30-£35 + bonus, plus mortgage relief, plus freebies galore or civil service and earn £20-£30k and thats it because the pension is shut – where are they going to go?
Thanks Kevin, I believe it is 6.5% at the moment. Which is fine if your on a decent salary but like you say the £20k’s are short ona month to month basis because of it.
Dont get me wrong people im not a civil service lover-No one was more up in arms about the plums at the top who said they wouldnt be taking a pay rise in 2010 – as I said when your on £110k plus a year i guess its not going to hurt to take a freeze, but to use that to emotinally blackmail the rest of your staff must of been demoralizing to them and caused alot of tension as there are many on considerably less then £110k that could do without freezing their pay as goods and services arent getting cheaper!
Still I think I have said enough on the topic. Thanks for some good jousting chaps and chappettes!
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none of you are listening particularly auntie GP.
We cannot carry on with the public sector pension scheme as it is WE SIMPLY CANNOT AFFORD IT. If you think we can tell us all how.
For the record i would be happy for the public sector pension fund to be say 6.50% employee and 10% employer. you could even say lower paid workers would get a higher contribution from the employer and the higher paid (and let’s get this straight there are a lot of high earners in the public sector) getting a lesser contribution. At least i have proposed an alternative.
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I work in finance.
No pension scheme (closed 10+ years ago, and was never index linked).
We pay for the staff annual “Jolly”.
we pay for the health insurance. No mince pie.
No other benefits and no big bonuses.
As for the sector benefitting from zero-ten:
Well, the states voted for it in order to secure future tax streams from the employees of the sector, and from the resultant economic benefit of retaining the sector. Virtually the entire tax take, however you look at it. Yes, it’s a dog’s breakfast, but ultimately, the purpose of it was to protect not finance but the economy as a whole, in order that services could continue. The CS pension scheme is therefore as much a beneficiary as the finance sector.
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Kevin:
I love it. None of us are listening. Is that really a valid response to people who happen to share a different opinion to yours.
Let’s put it in context – the public sector worker’s pension scheme is theirs. Not yours. If you want it, go and work in the public sector. Until then, quit with the sour grapes and accept that taxes pay for all public sector remuneration INCLUDING pensions.
And for your information – your suggestion is invalid. I know a number of public sector workers who already pay well above 6% into their schemes.
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Bob – Since when and how do you pay for your healthcare and xmas jolly if you dont mind my asking? When did you last get a bonus?
If your xmas do has always been paid for by staff out their own pocket then fine, I accept that you are an exception to the general rule. If it is a recession based cutback then that is different. Bearing in mind these are optional perks not contracted packages.
How do you pay for healthcare? Is it optional?
I accept that pensions were closed off in the private sector a long while ago – but that was in lieu of other benefits.
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truthman
normally i would not reply to a rant like yours but in this case i will.
where did I say i want to work in the public sector? wake up and smell the coffee mate!
we can’t afford this scheme and you haven’t said one sensible thing on how we are going to pay for it.
one more thing the public sector pension fund affects us all so i am perfectly entitled to comment on it as are all tax payers.
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OK – states workers get a final salary pension scheme. It may be generous for some (i.e. those top salary people) but it isn’t for others who earn low wages. These States workers have to pay into the scheme for 40 years in order to get a full pension – and they did not have a choice of whether to pay for it or not.
If it was stopped then would the public sector suffer – I would say yes. This island has enough trouble recruiting high quality and essential staff i.e. teachers, nurses, psychiatrists, police officers , fire officers as well as administrative civil servants and public sector workers who prop this island up.
The reviews going on are costing an absolute fortune and no doubt will result in some staff losing their jobs – perhaps being outsourced to the private sector. This island will not be able to recruit local staff to the public sector – this will cost more as non-local staff take over, they are entitled to higher salaries e.g. via rent allowance and have no real interest as to whether the island suffers of not as they will just leave when their licence is up. OK I am biased but i can see it happening in front of my eyes.
My eldest child has started working in the private sector: they get a bonus scheme, free summer and Xmas ball, free healthcare and a good salary. Perhaps there are companies that do not offer this but people have a choice as to who to work for.
Working in the public sector is now becoming a shameful thing to do – we are vilified whatever we do. The fact that the majority of us are working for our island and providing excellent services and working hard is being undermined. When you lose us then you will realise what good value for money we were!
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Auntie GP-
Don’t mind at all. Paying for (optional) health cover (myself and family) since it was first offered to me in the eighties. Basic cover, too, none of your BUPA rubbish. Band-Aid and a “there, there, dear”. Oh, unless you include the free use of the first aid kit? No doubt I’d be asked to pay for cleaning up if I bled too much.
Firm also insures me (their cost) for the cost of my salary, so they can pay me while I’m off sick (Don’t CS get that too? Not everyone gets sick pay, even these days you know. I’m lucky)and hire a relacement if required. Have always paid for firm’s annual dinner, this firm and last employer too. Last 2 employers even had pet doctors which we had to use, and were widely believed to be contracted to never sign anyone off). Sports and Social contributions include the dinner, and the health insurance is paid by cheque or deducted from salary. Last bonus was sometime last century, in another life.
Pension scheme closed to new members in lieu of nothing at all, actually. Just shut. In those days, one had to be over a certain age to be a member of the scheme, it was contributory, voluntary and was only available after years of service. Firm had the opportunity to close it to new members (no-one else had built up any membership rights, or indeed wanted them) and it was consigned to history.
What I find galling is that many of my CS colleagues compare their salaries to mine when soliciting an increase, but also assume that this comes with a whole range of benefits from cheap travel to company cars, non contributory pensions, cheap mortgages, share options and the like. For the minority that may be the case. For many of us, it simply isn’t. We don’t all work for Megabank.
And I’m not complaining BTW. My salary is able to support me well enough.
I think the CS scheme is unsustainable and needs urgent change. All arguments to the contrary seem to be based upon a jealousy factor of mostly ficticious benefits being enjoyed by ALL non CS employees. Most finance staff enjoy some benefits; some of us get as near to none as possible; some get absolutely everything and then some.
CS staff that are unhappy can leave. Go to Megabank and gold plate their house or whatever. No big deal. Maybe pick up a stonking redundancy package when Megabank lays them off. If it means incoming CS staff are paid more than their pensioned colleagues, so what? What will be good is the transparency of the cost of their employment; the fact that departments will have that cost allocated to their budgets; that CS staff will feel able to leave, rather than feeling like a hostage to their pensions. A lot of good stuff, not just bad.
I can assure you Auntie, that in the overall financial value of my perks and benefits I am much nearer the general rule. The vast majority of people fall under the £450 Income Tax threshold for benefits in kind.
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If all that is written here is true;
May I show my ignorance and ask:
Why is the private or any one else for that matter so eager to keep the Banking system in the Island.
All seem to be losers, one way or another; don’t you realise by now that it’s the *BIG BOYS’ who benefit. the rest of you are just
Skivvies.
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Now I wonder why a person would make a statement, that in the latter years has been trod on and mis-used by those who THINK they are the cat’s whiskers,
Those words I speak of are–
ALL MEN ARE BORN EQUAL;
Get it?
So why do so many boisterous types think they are better, and therefore should have preference over all others.
It’s time a sensible practice came into being; more justice for the lower ranks. not only the officers of state; They are the culprits,
the world laughs at the silly and daft conception of Class Deference.
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Thanks for your reply bob – some interesting stuff there. At the end of the day this is all just hear say and conjecture. All I have to go in is what I know from people around me, friends and family etc. When I worked in the private sector, I had no pension, I had a nice annual bonus, free medical cover for me and my partner and child if I had them (which I didnt) and also a nice Xmas ball and every other year a nice Summer ball too. I worked in an area of finance that allowed me to gain an insight into other peoples renumeration packages. During my time I saw hundreds, if not thousands of peoples packages from pretty much every work place in the island, most if not all finance houses, trust comps, Private Equity, Private banks, high street banks etc as well as different ranking civil cervants, posties, fire, police, the occasional dep, builder, shop worker – you get the picture. I did not meet one finance related worker who did not have medical cover or bonuses, admittedly I couldnt tell you about the Xmas ball as that wasnt a part of the discussion with these individuals, but if you look in the Guernsey Now you see pictures from different corps do’s, and like I say I have friends that work for Investec, Deutsche, Northern trust, HSBC’s Barclays, Lloyds, Credit Suisse etc and they tend to have xmas balls. The one thing most do not have is pensions, that I will concede
Unfortunatly Bob, if you work in finance and you dont get any of these, you have picked quite possibly the worst renumerating finance institute in the island. but if your salary is good and you get by on it and arent bothered about the trimmings then that is well and good. And if you have job satisfaction then it is all the better.
This seems to of somewhat slipped away from the orignal thread about CS pensions.
I dont know how to solve the problem of affording it – im sure there are ways, decrease the employers contribution, reduce spending etc – but can you tell me that by closing the scheme to new entrants, that the CS would not stutter and fail to get new entrants in? I think I said in a previous thread – think back to being 16, 18, 22 leaving education – bright lights and trimmings of the finance? or the CS whose only glowing light is a good pension? Lets not forget as well – Civil Servants are despised by huge groups of people and put up with a lot of abuse, I dont think Mr Investor walks into your office with a rounders bat, or calls you names and threatens to “get you” down the phone?
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Kevin:
Here’s my suggestion. You should pay more tax to fund the public sector pension.
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So a large number of people think the pension plan should be stopped, think on , the finance industry,immediatly before the crash, were crying out for 1000 more staff, and ,contrary to comments here, most do still pay very generous remuneration packages.Pensions at 1X60th of final salary per year,generally non contributery,health care schemes covering the whole family,travel allowance and sick pay not to mention bonuses.better than the states scheme, Oh and the wages have the potential to be far and away better.So tamper with the pension scheme at your peril. When the finance industry recovers those 1000 or so staff needed will haemorage from the civil service. towards the better pay and conditions offered, and it will be the better of the civil servants in varying positions that get the jobs.The civil servants pension scheme provides a pension at 1/80th per year worked for those in the scheme before the recent changes(yes its only just been reviewed) with the WORKER NOW contributing 6.5% so it is already inferior to many schemes.The states as employers had only been contributing about 7.5% of an employees salary, The headline figure is quite frightening to many but because of the acumalated fund is actually quite reasonable.the need for an additional 6.9 million was to be expected. In the 1990s the scheme was explained to employees as the employee paying 6% with the department employing paying typically between two and three times as much,(12-18%) and further added the States make up any shortfall. with the states departments putting less than promised into the kitty a black hole was inevitable, the states have failed to save in the good years and wheras they could now be cutting back they are now needing to revert back somewhere close to their original payment.
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Having listened to the comments.
I agree with with Kevin on his points made.
Truthman it is the tax payer who pays 14.5% of your pension and we have not the money to finance it anymore, you will have to like the rest of us pay it yourself.
I believe there is a black hole of 250 million in this scheme, over to you get you cheque book out, i do not want to subsidise it anymore.
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truthman
Are you for real?
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Equet:
I have never said I am a member of any public sector pension scheme, but I am able to see this from both sides.
You and I only ‘pay into’ the public sector pension scheme because some of our tax revenue goes towards the scheme. Public sector employees are members of a pension scheme that relies on employee, and employer contributions the same as many of the rest of us do.
If you are a member of a private company that has a pension scheme, which takes contributions from the employer, your customers are paying into your pension. Do we hear your customers complaining about this? No. And for that reason, all this talk about ‘us’ paying for public sector pensions is nothing but sour grapes and double standards.
Get an eye on the broader perspective people.
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One thing that puzzles me on thsi thread is the number of times Xmas balls/parties are mentioned. They probably come in at less than 200quid per employee, so are not really material in this debate!
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Auntie GP – I too see hundreds of remuneration packages each year. I know what’s out there and that all of these perks are rarely given to everybody. We pay somewhat more than average, so we aren’t losing out anywhere.
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A pension is part of the overall remuneration package. The employer part of the contribution just means that a civil servant is 15% or so more expensive (to the taxpayer) to employ than their headline salary.
If you take the pension away, you’ll have three choices:
a) face being unable to recruit anyone from the UK, since there is still a public sector pension there. So goodbye nurses, teachers, psychiatrists…
b) offer people a higher salary so you can still recruit. Which totally negates the point of getting rid of the pension.
c) get all staff locally. Funnily enough, I don’t notice a medical school locally, and we do seem to have been unable to train enough staff locally in many areas, but maybe the college of FE could magic something up.
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will you lot stop saying that people want the pension taken away from public sector employees. the pension payments by the employer (tax payer) are too great that’s all most people are saying.This may come as a huge shock to james and truthman but a lot of companies have trouble recruiting so the public sector is not alone in that.The fact is we cannot afford the scheme as it is end of ,move on.
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James, unfortunately you’re not quite correct. Yes it is part of the remuneration package, but a final salary scheme is not really quantifiable. So your 15% figure could be correct, but could also be wrong.
Also, surely the pension doesn’t matter to anyone we recruit from the UK because they won’t be allowed to retire here?
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Greg,
you’re right – it may not be exactly 15%. It is quantifiable though (either by totalling up the input the States is currently putting into the scheme, or by obtaining an actuarial estimate of the value).
The pension is of course valuable to people we recruit from the UK, because the States have an obligation to pay that pension wherever the person retires. A nurse from the UK will not leave the NHS and its pension scheme to come and work in Guernsey for no pension, regardless of whether that nurse retires subsequently in the UK or anywhere else.
There are plenty of people now living in the UK living on Guernsey civil service pensions, after years of working here.
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Sorry James, but it really isn’t quantifiable on a set basis each year (hence the extra cash that needs to be put in). If investment performance of the fund is poor, the tax payers have to meet the liabilities. This could be far more than 15%.
As for UK workers coming here, they would only receive the full benefit of the pension if they retired whilst working here? As we only offer short(ish) licences I would have thought this only applies to a very small amount of people?
I appreciate that we need to offer a pension scheme, but it’s time we moved away from the final salary scheme because we just don’t know how much it’s going to cost the tax payer in the future.
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