A top union official has protested at some of the options being considered for public sector pension reform.

Prospect senior deputy general secretary Sue Ferns fears that some of the options still under consideration could ruin the positive moves made by public sector workers to help address the pensions crisis arising out of the legacy funding gap between contributions and costs.

’A lot of progress has been made in relation to putting public sector pension provision on a sustainable footing and it is important to build on this work rather than pursue options that would potentially undermine it,’ she warns.

’This progress has depended on scheme members making very difficult decisions such as agreeing to increases in member contributions and reductions in benefits.’

Tynwald last month debated a Cabinet Office report on the issue. But amendments were made to its recommendations and new areas of consideration were thrown into the melting pot.

The initial report recommended a series of options to consider, including a voluntary defined contribution scheme for public servants; capping the salary on which pension benefits are based; and linking the ’normal pension age’ for each pubic sector scheme to the state pension age.

But the amendments added two further options: to look at a mirror scheme to ease the transition from the current defined benefit scheme to the proposed defined contribution scheme and to consider a career average revalued earnings (CARE) scheme.

In a letter to Policy and Reform Minister Chris Thomas MHK, Ms Ferns outlines a number of concerns.

She says that the impact of a defined contribution pension scheme on the legacy funding gap could be to make it worse for the ’next few decades’ if members opted out to defined benefit scheme to join such a plan.

A salary cap on which pension benefits are paid, she says, would have to apply only to future service, she says, as there would be ’significant legal difficulties’ with applying a cap on accrued benefits.

On the idea of linking the ’normal pension age’ in each scheme to the state pension age, she says there is no such normal age in the GUS. There would also have to be an equivalent improvement to benefits, she says, so once more there would be no impact on the sustainability of pension provision.

Prospect has no issue with CARE pension schemes, she says, but changing from a final salary basis would have ’no impact’ on the legacy funding gap.

A crucial factor has been in negotiations for a reasonable ’cost envelope’, which could see the GUS employer contribution go down to 15%, a drop of about one third.

She adds that ’all stakeholders’ have also signed up to the principle of a cost-sharing mechanism.

’When implemented, the cost-sharing mechanism will cap the cost of benefits being accrued in GUS to taxpayers. This will greatly reduce the risk associated with running a defined benefits pension scheme.’

She also praises the acceptance that responsibility for solving the legacy funding gap was not just for scheme members alone.

Government accounts give a figure of the pension scheme liability as £3.8bn. This is a long-term liability that will not be required to be paid all at once.

If the public sector pension schemes were fully funded, then the amount required to be in the fund would be £2.3bn, a significantly lower but still huge figure calculated by the PSPA actuary.

The island’s public sector pension schemes are ’pay as you go’ with no fund of money building up through contributions and any shortfall met from the Public Sector Employees Pensions Reserve Fund, which is due to run out in 2021-22.

The legacy funding gap is the difference between employee and employer contributions and the total gross expenditure. This figure is £23.4m in 2017/18, rising to £72m in 2035/36.

During last month’s Tynwald debate, Mr Thomas said the cost of pensions, in real terms, was reducing in the medium and long-term: ’The discounted net pension outgoing is projected to fall from £38.39m in 2018/18 to about £19.45m in 2062/63.’

But he warned against a ’slash and burn’ approach of simply cutting benefits, which he said would lead to legal challenges.

A fresh report on the options is due to be put before Tynwald in March.