Unions 'Extremely Concerned' About Pension Holiday

Public sector union leaders have written to States Members to express their 'extreme concern' about a proposed public sector pension holiday.

The Fairer Alternative deputies Heidi Soulsby and Gavin St Pier have lodged an amendment to the Funding and Investment proposing the States stop contributing to public workers' pensions between 2024 and 2027.

They say it would raise around £76 million to spend on capital projects, such as the hospital modernisation and post-16 campus.

But union leaders say it would destroy the 'sustainable foundation' of the scheme.

"You may recall the bitter dispute over reforms to the Guernsey Public Sector Pension Scheme between 2013-15, which resulted in an unprecedented demonstration of member opposition and protracted legal cases.

"The reforms and dispute were largely the result of a ‘payment holiday’ that the States took in the late 2000s whereby the employer contribution was reduced to an unsustainable level, taking the scheme from a healthy position to one that required substantial intervention."

Bosses also say they are worried the move would plunge the scheme into a 'significant deficit'.

"The States would then have to rectify, either through vastly increased employer contributions or through further reforms to pension benefits that would undoubtedly lead, as last time, to significant industrial unrest.

"As it is, in response to the surplus, last year, the States agreed to cut to the employer contribution rate.

"The joint unions were concerned that this was premature, based on the fact that it was on an actuarial valuation at the end of 2020 that pre-dated the effects of COVID, the Ukraine War and high inflation rates.

"The fact that the proponents of this amendment are seeking to rely on an actuarial valuation that is now nearly three years out of date is concerning."

Deputies Gavin St Pier and Heidi Soulsby

But, Deputy Soulsby says there have been understandable but significant overreactions from unions.

"There is no basis to assert that this would materialise as a fact because the position of the Fund in three years’ time will be a function of the performance of the fund’s assets linked to market conditions and total contributions.

"Employee contributions to the fund as well as employer contributions to the defined contribution part of the Fund will continue.

"Therefore the proposals would not have the deleterious impact that the unions are claiming."

She says that bringing in GST would have a greater impact on the scheme.

"The Policy & Resources Committee have said this week that “the first-year introduction of GST would have a one-off inflationary impact (of approximately 3.5%)...which would lead to a funding strain of approximately £50m."

Eight unions are urging deputies to reject the 'foolhardy and reckless' amendment.

Politicians will debate the Funding and Investment Plan in next week's States sitting.