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A report on the projections and economic impact of the proposed system of automatic enrolment into private pension saving and a new Secondary Pension Scheme has been published today.
The States decided in February 2016 to create a new system for automatic enrolment into a private pension scheme for working age Guernsey and Alderney residents not already in a scheme, following proposals from the then-Social Security Department.
The Assembly directed the Committee for Employment & Social Security to report back to the States of Deliberation with detailed proposals for implementation and an economic impact assessment of the proposals.
The scheme is now expected to start in 2020, after a private firm was hired to carry out the necessary assessments and projections.
Under the suggestions outlined in the report, it is estimated that 20,200 residents of Guernsey and Alderney will be auto-enrolled into a private pension scheme. It says it is important to note that membership is not compulsory and individuals can choose to opt out of the scheme.
Based on an estimate that 20% of individuals will choose to opt out, it is projected that 16,200 residents of Guernsey and Alderney – 39% of the working population - are expected to have the opportunity to save for their own retirement in a private pension scheme for the first time, as a direct result of these reforms.
The majority of those individuals are expected to be automatically enrolled into the States-facilitated Secondary Pension Scheme, although some will be automatically enrolled into alternative private pension schemes via their employer which meet a qualifying scheme test.
The projections suggest around 12,200 islanders will not be automatically enrolled due to their income being less than the lower earnings limit (2018 rate: £7,176 per annum).
Assets of the States-facilitated scheme are expected to grow up to £1.3billion over the first 50 years of operation.
Pictured: Deputy Michelle Le Clerc
Deputy Michelle Le Clerc, President of Employment & Social Security, said: “The Old Age Pension was only ever intended to provide a basic platform level of retirement income which, at a full level represents an income replacement rate of 40% for a lower quartile earner. The projections show that, with the introduction of the proposed auto-enrolment system, an income replacement rate of about 80% can be achieved. We are pleased to see that this exceeds the target income replacement rate as recommended by the UK’s Pension Commission.
"While some employers might find the prospect of an additional cost worrying, we are committed to developing a low-cost scheme with minimal administration burden to limit the impact on employers.”
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