14th September 2021

Contribution increases proposed to ensure long-term sustainability of Funds

Tuesday 14 September 2021

The Committee for Employment & Social Security has published its annual report on contributory benefits and contribution rates for 2022.

The report again highlights the unsustainability of the Guernsey Insurance Fund and Long-term Care Insurance Fund, which actuarial projections show will be exhausted in 2039 and 2053 respectively, if nothing is done to address this.

The Guernsey Insurance Fund provides financial assistance during old age, bereavement, incapacity, unemployment, maternity/early parenthood and death. The Long-term Care Fund is designed to assist with the costs of care in private nursing and residential homes.

The date that the Long-term Care Insurance Fund is expected to be exhausted is brought forward to 2038 if the scope of the Long-term Care Insurance Scheme is expanded to cover the provision of care at home, as approved in principle by the States in August 2020.

In light of this, the Committee proposes to increase the percentage contribution rate for employers and employees into the Guernsey Insurance Fund by 0.1% each (i.e. 0.2% overall for class 1 contributors) per year for ten years, with the rates for self-employed persons and non-employed persons under pension age increasing by 0.2% each per year over the same period.

The Committee also proposes to increase the percentage contribution rate for employees, self-employed persons, and non-employed persons (under and over pension age) into the Long-term Care Insurance Fund by 0.1% each per year for four years.

If agreed by the States, the above changes will take effect from 1st January 2022.

The Committee proposes to review this plan annually, in consultation with the Policy & Resources Committee. This approach is designed to be flexible while allowing for small steps to be taken to begin to address the unsustainability of these Funds.

The full rate of old age pension is proposed to increase by £5.48 to £233.85 per week. This is an increase of 2.4%, in line with the States-approved uprating policy, which means that pensions, and other social insurance benefits, will increase by slightly more than the cost of living. This new rate will be effective from 3rd January 2022.

All proposed changes to the contributory benefits and contribution rates are set out in the policy letter.

Deputy Peter Roffey, President of the Committee for Employment & Social Security said:

“The unsustainability of these two Funds, which are relied on by many Islanders, will come as no surprise to most people, and should certainly come as no surprise to States Members. We’ve made it clear in the past that, in their current position, these Funds are not financially sustainable in the long-term, and this report highlights how near these funds are to being exhausted.

“The debate on the Tax Review may identify measures to improve the situation, but this is likely to take several years to put into effect. We can’t continue to delay taking corrective action. The situation only becomes worse the longer it is left unaddressed.”

The Committee has formally requested that the Policy Letter be debated by the States at the meeting commencing on Wednesday 13th October.