Public Employees Contributory Retirement Scheme: Actuarial Valuation at 31st December 2007

STATES OF JERSEY

PUBLIC EMPLOYEES CONTRIBUTORY RETIREMENT SCHEME: ACTUARIAL VALUATION AT 31ST DECEMBER 2007

Presented to the States on 11th August 2009 by the Chief Minister

STATES GREFFE

2009   Price code: C  R.88

2

REPORT OF THE CHIEF MINISTER

1. Article 3(3)  of  the  Public  Employees  (Retirement)  (Jersey)  Law  1967 (L.11/67) (Revised Edition chapter 16.650) requires the appointment of an Actuary  to  review  the  operation  of  the  Public  Employees'  Contributory Retirement  Scheme.  Under  Regulation 6(1)  of  the  Public  Employees (Contributory  Retirement  Scheme)  (General)  (Jersey)  Regulations  1989 (R&O.7956) (Revised Edition chapter 16.650.36) the Scheme's Committee of Management  has  obtained  a  report  from  the  Actuary  for  the  period  to 31st December 2007.
2. In accordance with Regulation 6(2) of the Public Employees (Contributory Retirement Scheme) (General) (Jersey) Regulations 1989, this accompanying report from the Chief Minister presents to the States the Actuary's report.
3. The Scheme's Committee of Management and the States Employment Board have formally accepted the report, which was signed by the Scheme's Actuary on 2nd July 2009. In particular, the Actuary has concluded that the Scheme has a deficiency.
4. The deficiency is £63.2 million based on the provisions of the Scheme at the valuation date.

Making good the deficiency

5. The treatment of the deficiency disclosed at 31st December 2007 is covered by  Regulation 6(3)(d)  and  (e)  of  the  Public  Employees  (Contributory Retirement Scheme) (General) (Jersey) Regulations 1989.
6. The  Regulation  allows  a  valuation  deficiency  to  be  carried  forward  in circumstances where it appears to be of a temporary nature. However, taking into account an anticipated worsening of the Scheme's financial position after the effective valuation date of 31st December 2007, the Employer's Actuary's advice is that the deficiency should not be seen as "temporary" and that action should be taken to deal with the deficiency.
7. The Scheme is not a conventional final salary scheme where the employers have responsibility for meeting any deficiency. In principle, a deficiency may be made good by increases to the contributions of employers, or by increases to the contributions of current or future members, or by a combination of both. However, the Chief Minister and States Employment Board have made it clear that they are not supporting an increase in the employer's contribution rate, even though this is one of the available options.
8. A copy of every report, signed by the Scheme Actuary, will be laid before the States by the Chief Minister as soon as possible. If agreement is reached between  representatives  of the  States  Employment  Board  and  the  Public Employees Pension Scheme Joint Negotiating group, within 3 months of the Valuation being laid before the States, then the Chief Minister will present it to  the  Committee  of  Management  for  endorsement  and  to  the  States  for approval.

R.88/2009

3

9. If no agreement is reached and the Chief Minister and the Committee of Management have not agreed on proposals for dealing with the deficiency within 6 months of this report being laid before the States, in accordance with the Scheme's Regulations, future pension increases will be restricted to a level of 0.3% per annum below the increase in the Jersey Cost of Living Index, subject to review at future valuations.
10. Members who are subject to the Public Employees (Contributory Retirement Scheme)  (Jersey)  Regulations  1967  (R&O.5010)  (Revised  Edition chapter 16.650.48) and  the  Public  Employees  (Contributory  Retirement Scheme) (Former Hospital Scheme) (Jersey) Regulations 1992 (R&O.8443) (Revised  Edition  chapter 16.650.24) will  continue  to  benefit  from  full increases in line with the Jersey Cost of Living Index as they are protected by a States guarantee.

R.88/2009