Pensions and Benefits Date : March 2015. How to vote 1 You need to check your handset is set to the correct channel. Press this arrow and if the display.

Pensions and Benefits

Date : March 2015

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The principles of social security

To address poverty (individual and family)

To be simple and transparent

To encourage people to work (where they can)

Why do a review?

Pensions and benefits in the Isle of Man are complicated, expensive to run and will not be affordable in the future

We need a simple, fair and sustainable system

This is not new……

• Demographic Changes – the “ageing population”

• Pensions Act 2007 - Reform of State Pensions in UK to be applied in IOM

• Need to review Pension Supplement Scheme to ensure sustainability in long term

• Financing of nursing care in nursing homes• Financing of long-term care • Review of existing benefits programme

Social Security - Main issues for consideration

A complicated system

The state retirement pension is made up of six parts

It is very difficult to understandThe benefits system has 21 parts - all with their

own rules!The system was designed for the UK not the Isle

of Man

Affordability

State pensions and most benefits are paid out of National Insurance Contributions, and annual benefits are now costing more than we receive in contributions

We have a lot of contributions saved in a fund, but this will run out if we don’t make changes

Your views?

Comments or questions?

The Ci65 review

Started in 2013

Final report received in September 2014

Ci65’s forecast

INSERT CI65 GRAPH SHOWNING POSSIBLE FUTURE

-

200

400

600

800

1,000

1,200

1,400

2012

£M

Projected NI Fund Balance Projected Total Income Projected Total Benefit outgo

Mercer Base - NI Fund Balance Mercer Base - Total Income Mercer Base - Total Benefit outgo

2022 2032 2042 2052 2062 2072

Previous forecasts tell a story

What did Ci65 say?

Only changes to pensions or national insurance contributions will make a real difference to the future of the National Insurance fund

The current system is not affordable in the long-term

Minor changes will not be enough – “only bold transformation will do”

Question 1

0

1 - Strongly Agree

2 - Agree

3 - Neutral

4 - Disagree

5 - Strongly Disagree

Do you agree that action is needed?

Question 1 - Results

1 - Strongly Agree

2 - Agree

3 - Neutral

4 - Disagree

5 - Strongly Disagree

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Do you agree that action is needed?

A new Manx pensionFlat rate pension of around £180 per weekBuild-up over 45 years Minimum of 10 qualifying years before any

pension rightsPension increased each year in line with

average earningsLater retirement ageYou have some choice about when to draw your

pension

Protection

Existing pensioners will be largely unaffected

The pension supplement will be gradually removed over a 20 year period

Your views?

Is a flat rate pension a good idea?Should the build-up period match people’s

actual working lives?Should you have a minimum number of

qualifying years before getting a pension at all?Should the state retirement age go up?

Your views?

Should you have some choice about when you take your pension?

Should we protect existing pensioners from any changes?

Should the Manx pension supplement be gradually removed?

Question 2

0

1 - Strongly Agree

2 - Agree

3 - Neutral

4 - Disagree

5 - Strongly Disagree

Do you think that the Idea of a Manx Retirement Pension is a good idea?

Question 2- Results

1 - Strongly Agree

2 - Agree

3 - Neutral

4 - Disagree

5 - Strongly Disagree

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Do you think that the idea of a Manx retirement pension is a good idea?

National Insurance

With a new Manx pension –

Contributions need to match the cost of benefits

Changes must be – competitive for our economy– simple and fair for everyone

Ci65 suggested

Trying to make contributions from self-employed and employed people the same

Thinking about whether people who contribute should get a better deal

Making the system encourage employmentMaking the system simpler

Your views?

Should we keep a National Insurance system?Should employed and self-employed people pay

the same to get the same benefits?Should actually paying National Insurance

contributions give you a better deal from the system than people who don’t?

Would a simpler system be better?

Question 3

0

1 - Strongly Agree

2 - Agree

3 - Neutral

4 - Disagree

5 - Strongly Disagree

Are some changes to the National Insurance System needed if we keep it?

Question 3 - Results

1 - Strongly Agree

2 - Agree

3 - Neutral

4 - Disagree

5 - Strongly Disagree

Are some changes to the National Insurance System needed if we keep it?

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Saving for retirement

The state pension may only meet part of our financial needs in later life

Workplace and personal pensions already address this

What about those without workplace or personal pensions?

UK now has compulsory workplace pensions and Ci65 recommended that the Isle of Man should think about something similar

Ci65 recommendations

Everyone earning over £9,500 would be in a workplace pension scheme unless there is one already

The new retirement saving scheme would be set up by the Government

Employees would contribute 6% and employers 4% on earnings up to £60,000 per year

Question 4

0

1 - Strongly Agree

2 - Agree

3 - Neutral

4 - Disagree

5 - Strongly Disagree

Would some form of compulsory savings scheme for retirement be a good idea?

Question 4 - Results

1 - Strongly Agree

2 - Agree

3 - Neutral

4 - Disagree

5 - Strongly Disagree

Would some form of compulsory savings scheme for retirement be a good idea?

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Working age benefits

16 of our 21 benefits are for working age people - all with their own rules

Ci-65 recommended that we simplify our benefits system and make it responsive to the needs of the Isle of Man

They proposed a ‘new Manx benefit’

New Manx benefit

Manx benefit - a means-tested basic amount, based on who lives in a household

Additions to cover specific needs whether

permanent (disability) or temporary (sickness, maternity)

New Manx benefit

A simpler, faster, more transparent systemNo need to submit new claims when you move

from one benefit to anotherCheaper to administerSupports people in need but encourages them

to move “up and out” of benefitsA guarantee that people will be better off in work

than on benefitsIt might include a benefit cap

Your views?

Should we have a benefits system which suits the Isle of Man and control when we want to change it?

Should the system overall encourage people to be in work?

Should we introduce a benefit cap?

Question 5

0

1 - Strongly Agree

2 - Agree

3 - Neutral

4 - Disagree

5 - Strongly Disagree

Do you think that the New Manx Benefit sounds like a good idea?

Question 5 - Results

1 - Strongly Agree

2 - Agree

3 - Neutral

4 - Disagree

5 - Strongly Disagree

Do you think that the New Manx Benefit sounds like a good idea?

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Questions