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Treasury Minister comments on Public Sector "Pension Deficits" 30 October 2006

The Treasury Minister, Hon. Allan Bell MHK, sought to clarify the situation with regard to the Island’s public sector pension liabilities. The Minister stated:-

“The Isle of Man Government, along with many others, operates a pay as you go system for funding the pensions of its employees. This means that, in essence, today’s employees are, along with amounts raised through general taxation, paying for the pensions of retired previous employees.”

The Minister continued:

“It also means that future employees will be required to pay, in part, for the pensions of current employees, and therefore any perceived deficits will take decades to emerge, if they emerge at all.
The reported figure of £1 billion is the amount that would have to be set aside now if future public sector pensions had to be fully funded today. In fact the liability will only emerge over many years. We must also remember that it is an estimate based on a range of assumptions, such as the number of public servants employed, their length of service, their projected retirement dates and the rate of growth in future salaries, together with how well investments perform.
This is clearly a long term issue that Government has acknowledged it must manage to protect future generations of taxpayer. We must clearly control the growth in new liabilities. We should not raise unnecessary concerns over the ability of Government to meet and manage its current pension liabilities, which remain affordable over the foreseeable future.”

The Minister finally stated that the deficit on the Civil Service Pension scheme was around £350 million, not the £1 billion figure that had been reported in some media. The latter figure referred to the impact of schemes covering all public servants.

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