Tynwald will be asked next month to approve changes to the six public sector pension schemes that will see members benefit from a cost share saving.

The changes will cost an extra £3.3m a year.

They follow the first valuation to be carried out of the cost sharing scheme introduced in 2020.

This showed a decrease in the expected costs of providing public section pensions, due mainly to lower than expected salary increases and a slowdown in the growth of life expectancy.

As a result, the Public Sector Pensions Authority is recommending that the savings will be shared with scheme members by increasing their pensions.

Chair of the PSPC Jerry Carter said: ‘I can see why if you were in the private sector it would grate a little bit but it is genuinely part and parcel of an overall strategy that is resulting in a reduction of the burden that public sector pensions will have on the taxpayers of the Isle of Man.

‘The decrease in the overall cost of pensions will result in significant savings for government revenues going forward. On this particular occasion it has resulted in a significant reduction.

‘Next time it could easily go the other way. It’s a very good news story as it shows the reforms are working and the overall cost is coming down.’

The savings are 3.9% of pay in the unified scheme and 13.5% of pay in the teachers’ scheme.

Members in the unified scheme, and the police and judiciary schemes will get 75% of that saving, ie 2.9% of pay, which the PSPA says after consultation should be applied to increase the accrual rate so that their future pensions build up more quickly.

The accrual rate for those in the unified scheme will increase from 1.41% to 1.61% for service built up from April 1, 2024.

Meanwhile, the share for the employer will be the balance of 25% which will be used to reduce government contributions.

For teachers, their 75% of savings, equating to 10.1%, will be apportioned in three ways - it will be used to reduce their contribution rate by 1%, raise the accrual rate and increase the rate used to exchange part of their pension for a lump sum.

The 1% drop in teachers’ contributions will cost an immediate £537,000 a year.

Increasing the future level of pension for all schemes will cost £2.8m a year.

Mr Carter said: ‘We felt an obligation to pass the savings on in some form to members. If it had gone up we would have felt an obligation to pass on the increase to members.’

The next cost sharing valuation is due in 2028.

Cost sharing addresses fluctuations in the cost of providing a future pension for current members and employers.

It does not address the legacy funding gap between the schemes’ income and expenditure, the shortfall of which is managed and met from government revenue.