There was a £13.7 million shortfall in contributions in the government’s unified pension scheme for 2018.
Work is under way to draw up a voluntary defined contribution scheme for government workers - as an alternative to the current defined benefit scheme - to help address the public sector pensions deficit.
In the latest annual report by the Public Sector Pensions Authority on the unified pension scheme, a statement from independent auditor (KPMG), says: ’The recommended contributions to be made by the employer have been calculated as 20.3% of pensionable pay by the scheme actuary, while the employers’ normal contributions received equate to 15.42% of pensionable pay.
’This resulted in a contribution deficiency of £13,697,000 which is considered to be significant for the scheme.’
In 2018 the total amount of contributions was £58.389m, but the benefits paid out came to £72.273m.
The breakdown of contributions came to £43.525m in employer contributions and £14.553m in normal member contributions, plus £311,000 in voluntary additional contributions.
Problems caused by the legacy funding gap have been recognised for some time.
The government has previously indicated that its funding would need to increase annually, up to £155.6m by 2034/35.
One of the government’s proposals to help combat the problem is to introduce a voluntary defined contribution scheme by the end of next year.
When that was debated in Tynwald earlier this year, an amendment that would have meant that, in addition, the current pension scheme would be closed to new workers was rejected.
The PSPA says in the report: ’Irrespective of any uncertainties over the future funding arrangements for the schemes based on the Isle of Man Government’s future financial projections, the PSPA has concluded that the schemes can continue to meet their contractual obligations as they fall due, with any shortfall between income and expenditure being funded by the Treasury.’