THE Guernsey old age pension will be damaged by tinkering with its funding, it has been claimed. Former Social Security minister Mary Lowe yesterday slammed proposals to cut the grant to the Guernsey Insurance Fund by £2.35m.

She said it was irresponsible and could damage the pension fund.

‘The UK state pension has suffered and remains much lower than ours, because it has had to fight for its share at budget time against UK health and education expenditure – is this what we want to start doing with ours? I hope not.’

Deputy Lowe added that the sustainability of the pension scheme needed to be kept.

‘Many will have watched in horror during the last few years how individuals have suffered through irresponsible tinkering with pension funds. We should not be reneging to balance the books.

‘It’s not a surprise to me as I suspected this would happen, but it’s a big concern this is being proposed before phase one ‘of the new tax package’ has commenced.’

An amendment by the Policy Council to Social Security’s report on contributions could see the way the contribution is calculated change before 2008 with a view to reducing the grant.

If the grant is held to RPI, contributions may have to rise again to cover the deficit.

‘Government should not be dipping into the pension funds to resolve a financial problem. This government has already walked away from some of their share of a grant, contributors have had no choice but to pay increased contributions and Policy Council and Treasury and Resources now want more, and that’s before the next social security increases take place in January 2008.’

Social Security and Treasury are £2.35m. apart in their calculations on how much the grant should be for next year.

The Policy Council’s Fiscal and Economic Policy Steering Group is proposing a compromise of £14m. in grant.

It said the existing formula would see an above-RPI increase in the grant, which it believes should not rise above inflation because of the States decision to control public expenditure.

It accepted an RPI increase would have implications for the insurance fund.

It is suggested that the deficit could be replaced with a lump sum payment some time after 2011.

Deputy Lowe, a long-time opponent of the zero-10 policy who fought against a reduction in the annual social security, is sceptical.

‘Are they really saying that they can’t find the money this year, but they can find it next year and also pay the amount owing from the year before?’