A MAJOR change to the Isle of Man government’s pension scheme has been approved today by Tynwald to replace the scheme which was described as “unsustainable”.
Politicians were told this morning that the Isle of Man government’s existing pension fund will be exhausted within 20 years and the current pay-as-you-go scheme is running with an annual deficit of £23 million.
Chief Minister Tony Brown, in seeking approval for a number of major changes to the pension scheme, said that a new Unified Pension Scheme was a necessity. “We ignore this at our peril,” he said.
Mr Brown said the figures are “worrying” and continue to escalate and a number of complex issues have been raised - together with opposing views over which direction to choose.
During consultation with numerous bodies and individuals, the conclusion had been reached that a unified pension scheme was the best option for the future.
“This has not been an easy process,” he added. “Without change it has been independently estimated that the government Reserve Fund of £250 million will be exhausted within 20 years unless there is further money from government revenue sources.”
He said it was important that future generations did not find themselves paying for unfunded pension promises made today. He also pointed out that to retain the current system would require a reserve fund of up to £2 billion.
Claire Christian MLC said that the pensions issue was “one of the most significant pieces of legislation handled during the period of this parliament”.
She sought support for the new scheme and that “we should take the bull by the horns and get on with it.”
Mrs Christian said the proposed pension scheme being debated in the UK, based on Lord Hutton’s report, was not relevant to the Isle of Man. “We need a scheme just for the Isle of Man, not based on Hutton,” she said.
Chief Minister Tony Brown added, “Compared to Hutton, our scheme is dead straight forward.”
South Douglas MHK Bill Malarkey said that, initially, he wasn’t too sure that a Unified Scheme was the right direction to choose. “But I do believe this is the best scheme we have on the table,” he added.
However, he planned to vote against the scheme in protest at the “undue delay” with which the pensions of Members of Tynwald was being finalised.
Speaker of the House of Keys Steve Rodan said such a decision did not make any sense as it was “an entirely different scheme”.
Martyn Quayle, Minister for Social Care, gave his full support for the new scheme and said it would cost the government “millions” if there was a delay beyond the proposed start date of April next year.
Eddie Lowey MLC said that to hold back from making a decision now was not a realistic option. He said the new scheme was “affordable and the way forward”.
He added, “I am prepared to support it 100%.”
Alan Crowe MLC, who had extensive finance sector and pensions experience before entering politics, said the proposal was “a very good scheme” and felt it was “definitely the best way forward” for the Isle of Man.
Summing up, the Chief Minister said that the Isle of Man was “well ahead of the game” compared to the UK in making decisions about pensions policy. “By making changes today, based on projections we will build up the pension fund and have the money in reserve for it to be self-funding.”
He also said that it was worth looking back at the decision taken in 1995 to set up a reserve fund which, although criticised at the time, had been “an extremely important decision” with regard to the government’s ability to provide a pension scheme for the people of the Isle of Man.
When the vote was taken, the new scheme was approved by 18 votes to 2 in the House of Keys and by 9 votes to zero in the Legislative Council.
