Concerns as reserves used to fund pension pot

A former civil servant has told the BBC islanders are unaware of the "scale of cuts" to the Social Security Fund and Social Security Reserve Fund which pay towards pensions and benefits.

Accountant Alisdair Macleod said the States' use of reserve funds to offset cuts "doesn't feel healthy".

The Social Security Fund receives contributions from islanders; their employers and the government pay a contribution through the States Grant, though this was paused from 2020-2023 due to finance pressures connected with the Covid pandemic.

While a reduced grant into the Social Security Fund has since been reinstated, the government strongly rejects the claim the funds are being cut.

Social Security Minister, senator Elaine Millar told the BBC the government has continued to reduce the states grant to the Social Security Fund so that money can be freed up for "essential public services" like health.

In the 2026-2029 budget the government made the decision to temporarily reduce the value of the grant to £50 million a year into the Social Security Fund. Had the government paid the full value in it would be between £92-95 million a year.

Money from the Social Security Reserve Fund has been used to make up the deficit.

Millar said: "The Social Security Fund is actually very healthy, so we're not taking money out of the fund.

"I'm always at pains to point out - there is not money coming out of the fund as a result of the grant being reduced - it's a bit less going in."

The Social Security Fund functions as a current account for pensions and benefits, while Jersey has a separate Social Security Reserve Fund, which functions as a savings account to top up funding pensions in the long-term.

As the government is reducing the states grant into the Social Security Fund, it is drawing on money from the reserve fund to supply the shortfall.

Millar explained this was always the plan when the Social Security Reserve Fund was set up as it was meant to be a buffer for the Social Security Fund.

"The reserve fund was established to recognise that there might be a turning point where we could have more pensioners than we have working people.

"So, it's just to create that safety net that we don't need to increase contributions because have got that reserve."

Between 2020 and 2026, £396 million has been taken out of the Social Security Reserve Fund into the Social Security Fund.

The government is now proposing further transfers of £133 million over three years to cover the reduction in the states grant.

Millar said this was not a cause for concern as the Social Security Reserve Fund is "approaching 3 billion".

"That is a big sum of money and that is what it is there for, to help pay for pensions in cases of need."

"If we kept the States Grant at the full amount it would be like putting money in your savings account when you cant afford your electricity bill."

Alisdair Macleod, an accountant and former civil servant, said this policy "concerns him a lot" as the Social Security Reserve Fund has been built up over many decades and is "designed to cushion the impact of an ageing population".

"Since 2020, a significant amount of money has been taken out of that pensions pot [Social Security Reserve Fund] as a result of the government cutting the amount it's paying into the Social Security Fund and it's continuing to do that in this budget."

Macleod disputed Deputy Millar's view that the social security fund was "healthy".

"I've heard this fund described as 'healthy', yet the last full actuarial assessment of the fund in 2021 projected that on current levels of migration, the fund would run out entirely by 2082, and to me that doesn't feel healthy."

"Furthermore, when they last updated their projections to include the impact of a cut in the money being put in by the government last year, they projected that that would reduce the life of the fund by a further 10 years."

Jersey's Fiscal Policy panel warned that drawdowns and contribution cuts to the Jersey Social Security Fund should only occur after a comprehensive actuarial review of future pension liabilities.

However, States Members are being asked to vote on reducing the states grant to the fund for the 2027 budget before the review has been done.

When asked if that was problematic, Senator Millar said: "I think its fair because of of the size of the social security funds as a whole.

"There is plenty of money - nobody needs to be worried about the pensions. We can pay pensions for a very long time with the money we've got.

"Even if no contribution went in at all, we could still pay pensions for seven years.

"There not many countries with that level of funding for their pension schemes."

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