Two pensions if you worked in Isle of Man and UK

The pension system is likely to get more confusing

The pension system is likely to get more confusing

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Thousands of island residents who have spent part of their working life in the UK are to receive two separate pensions when they retire.

It’s the result of changes to the state pension being introduced in the UK from April next year.

The Isle of Man is planning its own changes with radical proposals to raise the retirement age, introduce a flat-rate £180 a week state pension and phase out the Manx Pension Supplement. Tynwald approved the reforms in principle in July.

But in the interim Treasury Minister Eddie Teare MHK is to seek Tynwald approval for a pension protection ‘safety net’ to guarantee no future pensioners are made worse off when the state pension systems in the UK and the island start to diverge.

Backbencher MHK Alfred Cannan (Michael), however, has questioned the rush to make changes. He said: ‘Why are we rushing headlong to change everything now when there is so much uncertainty?

‘We don’t know what the plans are for the future. Tynwald is being railroaded into this. There are potential risks for people getting close to retirement.’

The social security reciprocal agreement between the island and the UK is to be retained but in an amended form.

There will be no impact on existing pensioners or those who have only paid National Insurance in the Isle of Man.

But the split will mean future retirees who have worked and paid enough NI in both countries will receive two separate pension payments from April onwards, one from each government, rather than a single combined payment.

And there will be an added impact on those who have worked in the UK but lived and work here long enough to qualify for the Manx Pension Supplement.

The supplement pays up to an extra 46 per cent on top of the basic state pension but the amount payable to an individual is based on the amount of basic pension they are entitled to here.

Treasury will ask for support at the November Tynwald for changes to the Manx Pension Supplement scheme to ensure everyone retiring after next April gets the level of payment they were expecting. There’s also a proposed top-up provision to cover any other anomalies arising from the changes.

These safety net provisions will cost about £250,000 a year.

There are currently some 19,000 state pensioners in the island, and 9,000 of these have paid NI contributions in the UK.

Of those expected to retire in the next financial year, it is estimated that about 350 will have paid contributions in the UK and some of these may have also made sufficient contributions in the UK to qualify for the Manx Pension Supplement.

Member for Treasury Bill Henderson MLC said: ‘We are having to do this and nobody is going to be worse off as a result.’

Currently someone who retires after working 20 years in the UK and 20 years in the Isle of Man will be paid their state pension by the Manx social security division which will then bill the UK for its half.

This will no longer be possible when the two state pension systems diverge.

Ross Stephens, director of social security, said people would be given help in applying for their pension from the UK.

The number of qualifying years of NI contributions needed to get the new state pension in the UK has risen from 30 to 35. It remains 30 years in the Isle of Man. But a Treasury-commissined report has recommended that the number of qualifying years should rise to 45 here.

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