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Pension set to hit £250 a week

Pension set to hit £250 a week

Wednesday 14 September 2022

Pension set to hit £250 a week

Wednesday 14 September 2022

The States' pension could soon increase to just over £250 a week - or £13,000 a year - for a single person with a full contribution record.

But employers, employees and the self-employed face another increase in contribution rates as part of a 10-year plan to shore up the island's pension pot and other social security funds in response to the island's ageing population.

Social security contribution rates would go up from 6.7% to 6.8% for employers, from 6.8% to 7% for employees, and from 11.3% to 11.6% for the self-employed.

The changes in pension payments and contribution rates will come in from January if deputies back the proposals put forward by the Committee for Employment & Social Security at their meeting in October. 

The Committee claims that its proposals have already secured the support of the States' senior committee, Policy & Resources, ahead of the States' meeting. 

Committee for Employment & Social Security

Pictured: The Committee for Employment & Social Security is expected to take its proposals to the States' Assembly on 19 October.


The States' pension is adjusted annually based on a formula which takes into account changes to inflation and average earnings across the island. But using the formula now would mean reducing the States' weekly pension for 2023. 

Instead, the Committee for Employment & Social Security is proposing to set aside the formula, and to increase pensions by 7% - equal to the latest available rate of inflation. The same approach was taken in 2018 and 2019. 

The Committee hopes this will maintain the purchasing power of the States' pension by it keeping pace with rising prices throughout the economy. However, States' officials are already forecasting that inflation could be as high as 10% by the time of the proposed changes on 2 January 2023.  

The States pay out pensions of around £150million a year to nearly 19,000 people.


Pictured: Inflation is at a 30-year high. At times of higher inflation, pensions, benefits and allowances can quickly be overtaken by rising prices.


The Committee's proposed increases in social security contribution rates would mean a person earning £40,000 a year paying an additional £80 a year if employed or £120 a year if self-employed.

The States' own employment costs would go up by around £250,000 a year but contribution income for the island's social security funds would increase by approximately £4.6million a year.

The States' Assembly agreed last year that Social Security contributions should be gradually increased over 10 years - by 0.1% a year for employers, 0.2% a year for employees and 0.3% a year for the self-employed.

These contributions pay for the benefits provided by the Guernsey Insurance Fund, including the States' pension, the States' secondary healthcare scheme and the States' co-payment towards the costs of long-term nursing or residential care. 

Under the current 10-year plan, by 2031, employers will be paying contributions of 7.6%, employees 8% and the self-employed 13.4% - but these rates may be increased further once the States conclude their long-awaited tax review and revisit proposals to charge additional contributions on earnings for a new secondary pension scheme. 


Pictured: The Policy & Resources Committee's treasury lead, Deputy Mark Helyar, has faced widespread opposition to proposals to introduce a Goods and Services Tax at a time of increases in other taxes, charges and contributions as well as rising prices and growth in States' spending. 

Why put up rates before the tax review debate?

The first of the initial increases in contribution rates was imposed in January this year.

"When setting out its proposals to gradually increase contribution rates to address the sustainability of the funds, the Committee noted that its plans would need to align with the outcome of the States' debate on the tax review," said the Committee for Employment & Social Security in its later policy letter published yesterday afternoon. 

"However, it was noted that the Committee was of the view that implementing a small increase in contribution rates in the meantime would represent a positive step in the right direction, regardless of the outcome of that debate.

"The Committee notes that the tax review, which is expected to include proposals to significantly change the contributions system, is due to be considered by the States before the end of 2022. However, structural changes of this nature will take a least two years to implement.

"The Policy & Resources Committee has advised the Committee [for Employment & Social Security] that provisional transition planning for the tax review assumes that the plan to raise contributions will continue and will then be wrapped up in any structural change of contributions, meaning that the headline rate of contribution increase at that time will not be as large.

"Therefore, the Committee is proposing that the second step in the 10-year plan be implemented in 2023."


Pictured: Family allowance credits could be soon be removed for children over the age of five.

Other proposals

The Committee also proposes to increase other contributory benefits by 7% from January 2023. These include all benefits funded from the Guernsey Insurance Fund or the Long-term Care Insurance Fund.

In addition, the Committee is asking the States to back an investigation into whether social security contribution credits, which are usually available to women who receive weekly family allowance and typically do no paid work, should end once their youngest child is aged five rather than aged 16 as at present.


Local price rises hit 30-year high

States "kick can down the road" by delaying secondary pension debate 

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