DCSIMG

Final salary scheme must stay

SCRAPPING final salary pensions for new recruits to the civil service would compound its financial problem, MHKs were told.

The call to end the final salary scheme to new entrants was made in the House of Keys by Peter Karran (Lib Van, Onchan), who described the current arrangement as a ‘pyramid selling scheme’ which was building up bigger problems of affordability for future generations.

But Chief Minister Allan Bell said ending final salaries would just make the situation worse.

He explained: ‘It is a basic principle that a “pay as you go” scheme relies on the contributions paid in by employees to meet the outgoing costs of our ex-public service employees who are now pensioners. The pension project came about because the legacy schemes were numerous, complex, costly to administer and the incoming contributions were not meeting all of the outgoing costs – that was the problem we had to find a solution for.

‘Closing the scheme to new members would mean that incoming receipts dwindle and that would further compound the funding problem. Meanwhile an employer would also have to contribute funds to the new member’s defined contribution scheme.’

He explained that the new unified scheme introduced in April last year had improved protection for the taxpayer from rising costs.

Mr Bell told the Keys: ‘Having brought together most of the public service under one scheme to reduce costs and improve fairness, I would not wish to see different rules introduced for one part of the organisation, such as the civil service and I would not want to see a divisive policy for new recruits to the wider public service. I certainly would not want to see the current financial position made worse by closing the scheme when it is only 10 months old. I am satisfied that the pension offered allows us to attract professional new recruits to run our public services and the costs are being brought under control.’

Kate Beecroft (Lib Van, Douglas South) pointed out that ‘virtually nobody’ in the private sector could afford a final salary scheme.

 

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