Public sector employees in the Isle of Man are being asked for their views on proposed changes to pension schemes following the Public Sector Pensions Authority’s (PSPA) first cost sharing valuation.

The six-week consultation, which began on Friday 8 August, is open to public service workers currently paying into the Isle of Man Government’s unified, teachers, judicial and police pension schemes.

The proposals follow the PSPA’s 2022 cost sharing valuation, which indicated the future cost of providing public sector pensions will fall, resulting in a saving. Under a mechanism approved by Tynwald in 2020, changes in pension costs – whether increases or decreases – must be shared between contributing members and the government.

The valuation is required under the Public Sector (Cost Sharing) Scheme 2020, which assesses how the cost of pensions has changed over a six-year period. According to the Isle of Man Government, the process is designed to ensure schemes remain sustainable and affordable for both members and taxpayers.

The proposed legislative changes, which would require Tynwald approval, include an increase in the accrual rate. This means pensions would build up more quickly in the future.

For members of the Teachers’ Pension Scheme 2025, the proposals also set out a one per cent reduction in the contribution rate. Retirees under this scheme would also be able to exchange part of their pension for a lump sum at a rate more in line with other public sector schemes.

If the changes are implemented, increases to pensions would be applied and backdated to 1 April 2024. Adjustments to contributions and pension exchange rates would take effect from 1 April 2026.

PSPA chair Jerry Carter said the valuation showed that previous pension reforms, introduced in 2012, were having the desired effect.

‘Since 2012, public sector pension schemes have been reformed and employees are now paying more for a lower rate of pension,’ he said. ‘These changes have successfully reduced the cost of pensions to be more affordable and sustainable in the future.

‘I am pleased to see that the first cost sharing valuation has resulted in a saving, as this proves the reforms are working and real-term costs are coming down. The PSPA, after consultation with the Treasury and unions, has decided how the saving will be shared with scheme members.’

He said the reverse outcome – an increase in costs leading to higher employee contributions and reduced benefits – would have been a cause for concern.

Legislation requires cost sharing valuations every six years, with the next one due in 2028. However, Mr Carter said the Treasury and PSPA will carry out an immediate review of the process.

‘We want to ensure it is a viable and robust mechanism to support onward sustainability and affordability to the employees and the taxpayer, especially in times of unprecedented economic downturn,’ he said.

Full details of the cost sharing process and the consultation are available online for employees wishing to take part.