Copying the UK’s single tier state pension will extend the life of the island’s National Insurance Fund by just two years.
A review carried out of the NI Fund back in 2012 found that if no action is taken, the fund will be exhausted by the year 2054-55.
This summer social security officials asked the UK government’s actuary’s department to calculate what the impact would be if the Isle of Man adopted the single tier state pension being introduced across in April next year.
Its results, revealed in a letter dated October 28 now distributed to Tynwald members, show a single tier scheme would boost the fund, peaking in the 2030s, but it would then decline and run out completely in 2056-57.
In the House of Keys, backbencher Chris Thomas (Douglas West) asked for the findings to be made public and accused Treasury Minister Eddie Teare of ‘suppressing’ alternative options.
He suggested the reason the NI Fund was predicted to run out five years earlier than originally forecast was because of a different assumption about contracting out. ‘That possibility has not even been raised so we might not even be needing to talk about increasing retirement age to 74,’ he argued.
But Mr Teare said contracting out was not the major issue. The reason the fund had fallen by five years was that people are living longer and also the method of uprating used by the UK. He accused Mr Thomas of a being a ‘master of delay and procrastination’.
He said he intended to publish all reports and calculations relevant to the consultations, debates and presentations about the proposed new Manx pension.
Mr Teare supplied the Manx Independent with a copy of the letter from the UK actuary’s department.
It states: ‘The introduction of UK single tier is projected to affect the situation only relatively modestly, increasing the fund to a multiple of 8.6x benefit outgo by 2028-29 but then declining to exhaust by 2056-57. The introduction of UK single tier is consequently not expected to support a fund of 1x to 2x benefit expenditure for very much longer than the existing state provision would have.’
The letter explained this is because although the ending of contracting out increases contributions by about 3 to 6 per cent, the payment of benefits is projected to increase in the longer term, exceeding contributions from 2036-37.
In the Keys, Alfred Cannan (Michael) asked why reforms were being ‘rushed through’. Mr Teare insisted this was not the case. He said the UK brought forward its proposals, adding: ‘The longer we delay the shorter period we have to move and that runs the risk of unintended consequences.’