Guernsey has released a report into proposed pension system reform, which if implemented would see working age residents in Guernsey and Alderney automatically enrolled into a private pension scheme.
The stated aim of the proposed "secondary pension" scheme is to increase the number of people of working age saving adequately for their retirement.
Current estimates show that only 40 percent of the working-age population has access to an existing occupational or personal pension scheme. This includes the private and public sectors. The implication of this is that approximately 60 percent of the working-age population, currently around 25,000 people, are not making any personal pension provision, the report says.
Under the proposed scheme employers will have a legal duty to enroll their employees automatically into the new secondary pension scheme, or into another qualifying scheme. The employee can then decide to opt out. If an employee opts out, their employer will be required to re-enroll them into the pension scheme every two years. Again, employees will be able to opt out.
Once the scheme is fully established in 2030, employees will contribute 6.5 percent of their salary into the scheme, with employers contributing 3.5 percent.
The report into the scheme projects that, after opt outs, 39 percent of the working population are expected to have the opportunity to save for their retirement in a private pension scheme for the first time.
Commenting on the report, Michelle Le Clerc, President of the Committee for Employment and Social Security, said: "The old age pension was only ever intended to provide a basic platform level of retirement income which, at a full level represents an income replacement rate of 40 percent for a lower quartile earner. The projections show that, with the introduction of the proposed auto-enrolment system, an income replacement rate of about 80 percent can be achieved. We are pleased to see that this exceeds the target income replacement rate as recommended by the UK's Pension Commission."
By Courtesy of Lowtax