‘This is not about cost saving - it’s about reaching a sustainable position.’
That was the message from Treasury Minister Eddie Teare as he unveiled a raft of radical measures to reform the state pension and benefits which will go to Tynwald for approval in principle this month.
The proposals include raising the retirement age and introducing a flat-rate £180 a week state pension, phasing out the Manx pension supplement, replacing working age benefits with a single Manx benefit and bringing in a £25,000 a year cap on benefits.
The proposals have been drawn up following a 640-page report by consultants Ci65 which said the island’s ‘out of date and broken’ welfare system has not kept pace with the ageing population, has become too complex and risks failing the vulnerable.
Ci65 estimated that if current polices continued, the National Insurance Fund - out of which the state pension and some benefits are paid - will be exhausted by 2047, seven years earlier that previously projected.
The proposed £180 a week state pension is higher than the current pension but you would have to work longer to receive it.
It may mean children born today would have to work until they are 74 to claim their state pension.
A Ci65 recommendations that the island should break away from the reciprocal arrangements with the UK has not been followed, however. Instead, Treasury is proposing that the reciprocal link is maintained, but modified to provide greater flexibility.
Mr Teare said a consultation on Ci65’s recommendation had elicited 400 responses. He said there had been broad support from a single-tier pension and strong support for a 10 year minimum qualifying period.
He said there had been concerns expressed about people having to work 45 years to qualify for the state pension, especially among those in manual jobs or professions like medics where you go through a long period of training before starting your career.
Mr Teare said the current multitude of working age benefits were confusing. These would be abolished and replaced with a single Manx benefit that would be easy to understand and would avoid the need to make multiple claims.
He said only about 10 people would be affected by a £25,000 a year benefits cap.
Tynwald will be asked to agree a set of high-level principles for reform, which will allow for more detailed arrangements to be drawn up.
Me Teare said detailed proposals would be brought to Tynwald this time next year at the very earliest.