Closure of Defined Benefit Pension Scheme

| April 9, 2014 | 0 Comments

The Commission has decided to close its defined benefit pension scheme to future accrual with effect from the 1st July 2014.

Last September the Commission announced that it had entered into a consultation period with those of its employees who were members of the Commission’s defined benefit pension scheme, over a proposal to close that scheme for future service entitlement. The consultation period concluded at the end of last year.

Unsurprisingly, the current projections from the actuaries are that the costs and future liabilities of the scheme are continuing to increase. The FRS 17 valuation is likely to show that the Commission’s net pension scheme liabilities increased markedly in 2013 compared to 2012. This has reinforced the Commission’s previous concerns that its defined benefit pension scheme is simply unaffordable.

Against this background the Commission has reluctantly concluded that it has no choice but to withdraw from the Final Salary Public Sector Pension Scheme and will therefore be closing its scheme to new contributions from 1 July 2014.

In arriving at its decision the Commission has also taken into account other considerations including the fact that most firms within the island’s finance industry have largely phased out their defined benefit pension schemes. The Commission believes it should be offering terms and conditions of employment which are broadly comparable with those now on offer within the financial services industry.

The Commission has very much appreciated the cooperation and understanding of those of its staff who have been affected and would confirm that they have been offered alternative arrangements including moving to a defined contribution scheme.

Director General, William Mason commented, “The Commission is not immune from the demographic challenge that Guernsey, the UK and many other jurisdictions face. Sadly it has become virtually unaffordable for any organisation which wishes to have a solvent future to maintain defined benefit schemes which allow members to retire in their sixties with, on average, at least twenty years of retirement ahead of them. I’m very sorry that the Commission has had to close its final salary scheme and I am grateful for the understanding of our affected staff.”

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Category: Finance & Business

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