THE Manx pension supplement is safe – until 2016 at least.
That’s the message from Social Care Minister Chris Robertshaw who has moved to reassure pensioners worried that the supplement - which currently adds just under 50 per cent on to the basic state pension – is under threat.
Their fears were prompted by a recommendation from an independent review team looking into the scope of government who suggested the Manx pension supplement be phased out or its recipients limited as part of possible major savings needed to rebalance public finances.
The supplement currently adds £52.45 to the basic state pension of £107.45 per week. It’s estimated to cost £33.9 million this year on top of the £115.8 million for the state pension, funded by contributions to the Manx National Insurance fund.
But Mr Robertshaw insisted scrapping the supplement would not make savings – and could even cost his department more if its resulted in more pensioners claiming income support.
However, radical UK proposals to reform the state pension will have an impact here and will mean changes to the Manx pension supplement will be inevitable in future.
Mr Robertshaw, however, said his department does not intend to make any changes to the Manx Pension Supplement Scheme until 2016 at the earliest.
He said: ‘The pension supplement is funded out of National Insurance contributions, not general revenue. Therefore, it would be wrong to suggest that by cutting the pension supplement savings in revenue expenditure could be achieved. In fact, if the rate of the pension supplement was reduced or if fewer people received it, then more pensioners would become eligible for means-tested income support.’
He said the UK Government actuary’s report received last year confirmed that the island’s National Insurance Fund was sustainable in the longer term, provided the state pension age was increased in line with increasing average life expectancy.
The minister said this was a ‘fair policy’.
‘Tynwald has recently approved an increase in the state pension age to 66 for both men and women to take effect in 2020, to mirror arrangements in the UK. Furthermore, the UK Government has said that it will further increase state pension age to 67 by 2028 and the island will follow suit under our reciprocal arrangements.’
But changes are likely from 2016 onwards following moves by the UK to introduce a single tier state pension of around £140 per week, for people reaching state pension age on or after the introduction date.
Given the existing reciprocal arrangements with the UK, that change would need to be adopted in the island – and maintaining a Manx pension supplement of nearly 50 per cent on top of the new higher rate would clearly have a major cost implication for the Manx exchequer.
Mr Robertshaw said: ‘These UK proposals are at an early stage.
‘Once more information is known, due consideration will be given to this and other policy options and recommendations made to Tynwald in order to protect the island’s interests and to ensure Manx pensioners continue to enjoy an appropriate and affordable state pension.
‘In the meantime, I do hope those pensioners in receipt of the Manx pension supplement are suitably reassured by my statement.’
The supplement was brought in when the link between pensions and average earning in the UK was broken under Margaret Thatcher’s government.
That link to average earnings has now been restored and this has resulted in the supplement no longer being uprated at 50 per cent of the basic state pension. It’s currently a top up of 48.8 per cent.
If a universal state pension was introduced here, it is likely that the Manx supplement would be reduced to a level that would offset the shortfall between the £140 per week new basic state pension and the higher sum currently paid in the island to those eligible for the supplement.