BBCOptions to replace the “triple lock” state pension uprating policy have been outlined in a report on the sustainability of the Isle of Man’s National Insurance Fund.
The £1.07bn fund is topped up annually with money left over after contributions from workers have been used to pay for the majority of benefits and state pensions.
However, an actuarial report in 2022 forecast the surplus would reduce and the fund would be exhausted by 2047-48, partly due to people claiming state pensions for longer.
Treasury Minister Alex Allinson said steps were needed to “guarantee the long-term future” of the fund and for a “national conversation” should be had about the situation.
That “triple lock” principle is based on a formula that increases pensions annually by the highest of three options, namely 2.5%, CPI inflation, or average wages increases.
The report sets out four options for reforming the policy to create “another way to increase pensions each year in line with inflation” by linking it to CPI and other factors.
Under some of those models, a year with negative CPI could see pensions receive no uplift.
Any change would only affect those who reached state pension age after 5 April 2019.
‘Not sustainable’
The report said four NI Fund “policy principles” would be referenced when decisions were taken on steps that involved taking money out of the pot.
They included protecting the value of the Manx State Pension, restricting investing any surplus from the fund, and ensuring all expenditure from it can be funded through contributions into it.
The list also included a re-examination of those principles every five years as part of the actuarial review of the fund.
In his 2023-24 budget speech Allinson said the triple lock was “not sustainable in the long-term without putting increased pressure” on those who paid NI, which he said would be unfair.
Commenting on the latest report, he said: “Over the coming months I will be engaging with Tynwald members to develop a plan that will ensure the long-term sustainability of the current scheme.”
A further report would be provided prior to next year’s budget, he added.
