Social Security Department: Minister’s Report and Financial Statements – 2013.

Minister's Report & Financial Statements 2013

Social Security Department

R.123/2014

Social Security Department  Centre for work, pensions and benefits  

MINISTER  

Francis Le Gresley, MBE

Senator  

ASSISTANT MINISTER  Susie Pinel

Deputy of St. Clement  

CHIEF OFFICER  Richard Bell

Presented to the States by the Minister for Social Security.

Contents

Section 1 – Minister's Report ........................................................................................ 4

Minister's Foreword.....................................................................................................................................4 Social Security – Our Service ........................................................................................................................6 Executive Summary......................................................................................................................................7 Who does Social Security Support? .......................................................................................................... 14 Social Security Overview ........................................................................................................................... 16

Section 2 – Fund Income ............................................................................................. 18

Contributions ............................................................................................................................................ 18 States Grant .............................................................................................................................................. 20 Social Security (Reserve) Fund Investments ............................................................................................. 21 Health Insurance Fund Investments ......................................................................................................... 23

Section 3 – Social Security Fund Benefits (SSF) ............................................................ 25

SSF – Old Age Pensions (OAP) ................................................................................................................... 25 SSF – Survivor's Benefits and Death Grants .............................................................................................. 28 SSF – Short Term Incapacity Allowance (STIA).......................................................................................... 29

SSF – Long Term Incapacity Allowance (LTIA) and Invalidity Benefit (INV) .............................................. 30 SSF – Maternity and Adoption Benefits .................................................................................................... 32 SSF – Home Carer's Allowance (HCA) ....................................................................................................... 33 SSF – Insolvency Benefit ........................................................................................................................... 33

Section 4 – Health Insurance Fund Benefits (HIF) ......................................................... 34

HIF – Medical Benefits (GP Consultations and Letters of Referral) .......................................................... 34 HIF – Pathology Laboratory Benefit .......................................................................................................... 35 HIF – Pharmaceutical Benefit.................................................................................................................... 35 HIF – Gluten-free Scheme ......................................................................................................................... 37

Section 5 – Tax Funded Services and Benefits .............................................................. 38

Tax Funded Services – Back to Work ........................................................................................................ 39 Tax Funded Services – Jersey Employment Trust ..................................................................................... 43 Tax Funded Services – Jersey Advisory and Conciliation Service.............................................................. 43 Tax Funded Services – Health and Safety Inspectorate ............................................................................ 44

Tax Funded Benefits – Income Support .................................................................................................... 45 Income Support: Weekly benefit .............................................................................................................. 45 Income Support: Transition (Protected) Payments .................................................................................. 57 Income Support: Residential Care ............................................................................................................ 58 Income Support: Special Payments .......................................................................................................... 58 Income Support: Cold Weather Payments ............................................................................................... 59 Income Support: Ministerial Exceptional Payments ................................................................................. 59 Tax Funded Benefits – Christmas Bonus ................................................................................................... 60 Tax Funded Benefits – Food Costs Bonus ................................................................................................. 60 Tax Funded Benefits – Cold Weather Bonus ............................................................................................ 61 Tax Funded Benefits – 65+ Health Scheme .............................................................................................. 61 Tax Funded Benefits – 75+ TV Licence Benefit ......................................................................................... 61 Tax Funded Benefits – other benefits ....................................................................................................... 62 Departmental Administration Costs ......................................................................................................... 63

Section 6 – Financial Statements ................................................................................. 64 Appendix: Summary of legislation completed or amended in 2013 ............................. 76

Section 1 – Minister's Report

Minister's Foreword  

I am pleased to present the 2013 annual report for the Social Security Department. Last year's report combined information on both contributory and tax-funded benefits for the first time, and the successful debut of that format has been built on to produce this year's publication.

The diverse work of the Department provides a wide range of benefits and services that are used by virtually every Island resident at some time in their lives. This report offers a comprehensive overview of these wide-ranging activities. Headline figures include a total expenditure of £422 million and a contribution income of £185 million, supported by a strong reserve fund with a balance of £1.2 billion.

Unemployment has steadily dropped in 2013 from a record high of 2,050 in March to a year- end figure of 1,750 and is on course to continue this trend into the future. Services provided by the Back to Work teams at the Social Security Department constituted the States' frontline response to unemployment. Throughout 2013 BTW continued to develop approaches that were innovative, responsive and cost-effective, and I'm very proud of everything that the staff have accomplished in such a short period of time. I am especially pleased to report that our schemes to encourage employers to prioritise locally-qualified unemployed people have proven to be a great success.

In parallel with the services provided by the Back to Work teams, I gained approval for tougher benefit sanctions under the Income Support system and during 2013 laid the groundwork for an increased financial incentive for Income Support claimants to take up and remain in work. This was implemented early in 2014 when the percentage of earned income that households can retain was increased. People who need help will always be supported, but one of the most effective ways this can be done is to ensure that they are always financially better off in work rather than on benefits. I also remain mindful of the small minority who abuse the benefit system, and in 2013, I strengthened resources to identify and discourage fraud by increasing the number of fraud investigation officers.

I lodged and the States approved a new Discrimination Law in 2013. The first stage of the Law will protect everyone in Jersey against discrimination on grounds of their race, nationality, ethnicity, colour and national origin. This Law is an important step from which Jersey can build protection against other forms of discrimination in the future, including sex, age and disability.

Looking further to the future, work continues to support long-term projects. 2013 has seen my officers working closely with colleagues in the Housing Department to facilitate the Housing Transformation Programme, an ambitious and comprehensive programme to increase the quality and availability of social housing in the Island.

One of our biggest long–term challenges is the response to the demographic changes affecting the Island and planning to support the Island's ageing population. 2013 saw significant progress towards a new benefit designed to provide help for those people who require assistance with the costs of long term care. Following the approval of a new Long Term Care Law in 2011, the States approved a detailed policy proposal and associated regulations in 2013. This is a huge achievement and will lead to one of the largest changes that Jersey has seen in the funding of social care. This work involved close partnership between my officers and colleagues in the Health and Social Services Department, the Taxes Office, Treasury and Resources and the Chief Minister's Department. I would like to take this opportunity to thank those Departments for their hard work and support.

Work was also initiated to review various provisions for GP and dental services in the Island, and officers are committed to work alongside colleagues in Health and Social Services to address this important area. I'm confident that this collaboration will lead to improvements in access to primary care services, particularly for children and older residents.

Social Security – Our Service

Our overarching aims are to help people achieve and maintain financial independence and to provide benefits to those islanders who are unable to support themselves. Our purpose is to offer:

Support, Opportunity and Service by

Supporting people to achieve and maintain an acceptable standard of living,

Helping employers and employees to work well together for their mutual benefit and the economy of the Island,

Planning for an ageing population, and

Delivering benefits and high quality services.

We are responsible for:-

• A compulsory, contributory Social Security Insurance Scheme that receives contributions from employers, employees and general tax revenues. This fund is most closely associated with the payment of pensions, but the scheme provides contributors with benefits throughout life by offering support from Maternity Allowances through to Death Grants.
• A compulsory, contributory Health Insurance Scheme that receives contributions from employers and employees. This fund subsidises GP consultation fees and pays for the prescriptions issued by GPs and dentists.
• Non-contributory means-tested benefits including Income Support. These are funded from general tax revenues and provide targeted support for lower income households. In addition the tax funded Christmas Bonus is paid to local pensioners and certain other benefit claimants.
• Back to Work services which help people into work and support adults with special needs to obtain and maintain employment.
• Employment legislation, which sets out minimum standards for good employment relations and protection in the workplace including rights relating to written terms of employment, holidays, rest days, notice pay, redundancy pay, unfair dismissal and a tribunal to resolve disputes. The Department also has responsibility for setting the minimum wage. The Department funds the Jersey Advisory and Conciliation Service (JACS) to provide advice, training and conciliation.
• Health and Safety legislation providing a legal framework which sets out the duties of employers and employees to observe health, safety and welfare at work, as well as the Health and Safety Inspectorate which provides proactive advice to employers and undertakes investigations when things go wrong.
• Developing discrimination legislation. This legislation will create protected characteristics' ensuring people are not treated unfairly due to their race, sex, age or disability, taking into account best practice adapted to the needs of Jersey.
• Developing long-term care legislation. This legislation will collect contributions from adults who pay income tax and provide benefit to adults who have long-term care needs.

Executive Summary  

Old Age Pensions  154.2    29,052 pensioners  

Long Term Incapacity Allowance & Invalidity Benefit  23.6    4,574 claimants  

Income Support: Residential Care  16.7    579 claimants  

Medical Benefits (GP subsidy)  8.8    351,099 GP consultations  

Survivor's Benefits  4.7    928 claimants

Home Carer's Allowance  2.0    198 carers  

Insolvency Benefit  1.1    225 claimants  

Health and Safety at Work  0.5    621 incidents reported  

Food Costs Bonus  0.3    1,447 households  

65+ Health Scheme  0.2    4,011 claims  

TV Licence Benefit  0.3    1,879 claimants  

Table 1:            

Getting People Back to Work

Tackling unemployment remained the Island's greatest priority during 2013, with the number of registered unemployed people in Jersey reaching a record high of 2,050 in March.

Through the focussed work of our Back to Work (BTW) programme, the number of people registered as actively seeking work had fallen to 1,750 by the end of December 2013. This total, whilst still uncomfortably high by Jersey standards, was the lowest recorded since October 2012. A total of 5,049 individuals were registered at some point in 2013 with the Department.

Following its launch in 2012, Social Security's dedicated Back to Work team continued throughout 2013 to deliver innovative initiatives to tackle the record levels of unemployment. For example, a new hospitality training programme in January resulted in 268 jobs being secured by unemployed Islanders in an industry that traditionally recruits a high percentage of its employees from outside the Island. October saw the successful debut of JobsFest, a new initiative created to help those who had not worked at all during the year. This led to the creation of 109 paid positions.

Over the course of 2013, Back to Work helped unemployed people into 1,818 paid jobs, up from 1,326 in 2012. Reducing unemployment remains the States' number one priority, and Back to Work as the key part of the States cross-departmental initiative, will continue to support local people to find jobs, and help local employers find the staff they need.

Planning for an Ageing Population

The net asset value of all four funds at the end of 2013 was just over £1.33 billion, split between the Social Security Fund – £76 million, the Social Security (Reserve) Fund – £1,157 million, the Health Insurance Fund – £86 million and the Long Term Care Fund – £12 million. The performance of investments accounted for the majority of the annual increase in assets during the year, much of which was driven by rising markets; once again the year saw good returns from equity and corporate bond markets. This build-up of reserves is a sensible approach to the provision of future pensions and benefits, particularly when considering the demographic changes that are on course to affect all economies in the developed world. Simply put, people are drawing pensions for longer as lifespans increase, whilst birth rates remain static, reducing the ratio of workers to retirees and therefore adding to the pressure on the pension fund. Jersey is in a robust position that few other jurisdictions can match, but nevertheless it is inevitable that these trends must be factored into our long-term planning. With total benefit expenditure of £229 million in 2013 and costs rising steadily in the future, our reserves represent less than 6 years' expenditure.

A high level summary of the 2013 results for the four funds is shown in Table 2 below:

Social Security  Social Security  Health  Long Term Care Fund  (Reserve) Fund  Insurance Fund  Fund

£ million  £ million  £ million  £ million

Income  219.3  195.6  37.2  11.7 Expenditure  207.5  0.3  31.7  0.0

The UK Government Actuary's Department carries out periodic reviews of the financial condition of the funds we manage. These reviews consider the position of the fund taking into account changes in legislation and fund experience since the previous review, and project possible future levels of expenditure from the fund. This is balanced against possible contribution rates necessary to fund this expenditure. A review of the Social Security Fund

Ensuring Benefits are Fit for Purpose  

addition, they included a new sanction to reduce the Income Support available to someone who leaves paid work without a good reason. Although the vast majority of jobseekers claiming Income Support will not be affected by the changes, they are expected to provide a strong deterrent to the small minority of Income Support claimants who do not do enough to find work.

Towards the end of 2012 we introduced a new benefit to protect Islanders whose employer becomes insolvent. Insolvency Benefit replaced a previous temporary scheme and provides employees with financial assistance if their employment ends due to the insolvency of their employer. The intention of the new benefit is to ensure that, where a formal insolvency procedure is underway, the former employees of insolvent businesses receive compensation in respect of any money owed to them by their former employer. This includes unpaid wages, holiday pay, statutory notice pay and statutory redundancy pay. This benefit is included in the Social Security Fund, and supported 225 employees who were made redundant in 2013 at a cost of £1.1 million.

Following a change in the Health Insurance Law in 2012, the Minister is now able to fund contracted services through the Health Insurance Fund. In 2013 the first small contract was agreed to provide a specialist GP service to a group of vulnerable adults.

Supporting Workers

The Minister for Social Security is responsible for the legal framework which governs and supports good employment practices, including the setting of the minimum wage. The Minister followed a recommendation by the independent Employment Forum and increased both the minimum wage and trainee rate in 2013.

Supporting workers during short and long-term illnesses is an important function of the Social Security system. Over 25,000 claims for Short Term Incapacity Allowance (often called "sickness benefit") were made during 2013. 50% of all claims lasted less than 8 days but 10% lasted more than 45 days. Over recent years the number of short term absence claims has been decreasing, while the average length of these claims has been increasing.

In May 2013, the States approved the draft Discrimination Law which will protect everyone in Jersey against discrimination on grounds of their race. Protection will apply in employment and recruitment, as well as in other areas including the use of premises, tenancies, education, clubs and associations, banking, shops, restaurants and other goods and services. This is an important achievement in terms of Jersey's international obligations in relation to race discrimination. We will continue to prioritise this work by consulting next on protection against sex discrimination. Our Minister also directed the Employment Forum to consult on whether Armed Forces Reservists in Jersey should be given employment protection when they are mobilised on active service, given the potentially greater call on the services of Reservists in the future. The Forum reported back with its recommendation at the end of February 2014 as to the appropriate level of protection that could be introduced via the Employment Law.

Improving services

Delivering better value for taxpayers is key to the ongoing success of the Island. The public sector has the potential to be more efficient and more responsive, but a significant cultural shift is required to deliver this kind of change whilst maintaining the high levels of customer service that taxpayers expect.

During 2013 our officers joined colleagues to participate in the States-wide process of public sector reform, and have already developed initiatives to reduce waste and provide better value across the services that we provide. We have no intention of lessening our focus on traditional customer service, but the process of modernisation requires us to look at ways of delivering services that are quicker and more convenient for the changing lifestyles of many of our customers.

Shaping Primary Care in Partnership  

Joined-up Government

Department stock for each comparable property type. Previous research had established that the historic process for the annual increase of Housing rents had resulted in "fair rent" levels that did not reflect the market, and so the proportionate increase in rates are expected to help the Income Support system to provide support to private sector tenants in a way that better represents their cost of living. These changes to support for private sector rentals were developed in 2013 and implemented in April 2014.

In addition, we worked closely with the Population Office to facilitate the introduction of the new Control of Housing and Work Law, which replaced both the Housing and the Regulation of Undertakings Laws. We worked with the Population Office to agree the details of the new registration card, and from July 2013, we became the central location for people to register under the new Law, notify changes to their circumstances and obtain the new cards. These cards replace the old Social Security cards, as well as holding information required under the new Control of Housing and Work Law, for employment and housing purposes.

Managing Public Finances

2013 was the first year in which the States moved to medium term financial planning instead of annual business planning. Together with the approved Strategic Plan, the Medium Term Financial Plan is designed to change the way government operates, most crucially in placing the focus on longer-term decision making and planning.

The Plan covering 2013 to 2015 aims to ensure that the States has the financial ability to achieve its financial goals over the three years of the Plan. It incorporates medium and long term financial plans to deal with taxation, as well as funding strategies for long-term capital and revenue expenditure. The States decided that this kind of planning was essential to respond to challenges such as the economic downturn and the ageing population.

We receive funding directly from the States of Jersey to deliver a range of "tax-funded" benefits and services, as opposed to those directly funded by Social Security contributions. In response to the record levels of unemployment and the uncertain global economic outlook, our tax-funded budget for 2013 was increased to £184.6 million. The actual expenditure in 2013 was 1.5% lower than budget, at £181.8 million. The impact of the BTW programme lessened the effect of the recession on unemployment, and by extension Income Support, and a budget underspend of £11.7 million was utilised to provide initial funding for Long Term Care and delay the introduction of the new Long-Term Care contributions.

During 2013, we also made £2.8 million of savings to the tax-funded budgets as required by the States Assembly. A major contribution to the departmental savings target was achieved through changes to Survivor's Benefit and Invalid Care Allowance (ICA) which were implemented at the start of 2013. A new benefit, Home Carer's Allowance (HCA), was paid from the Social Security Fund from 1st January 2013. Existing ICA claimants were transferred to HCA, which is paid at the same rate as the existing benefit. Some changes were made to the benefit rules in order to bring it in line with other contributory benefits.

From 1st January, the entitlement to Survivor's Benefit was restricted. Historically, this benefit was paid to working age people (regardless of income) following the death of their spouse or civil partner, and was based on the traditional concept of a widow's pension. Such pensions were established at a time when it could be very difficult for a widow to find employment and support her family. Female employment patterns have changed substantially over the last few decades and a review of survivor's benefits suggested eligibility for Survivor's Pensions should be limited to those with a dependent child. The States agreed to this rationalisation in 2012 and also approved an amendment to ensure that survivors born before 1 January 1957 (survivors in older age groups) would continue to be eligible to claim a Survivor's Pension, as well as protecting all existing claims.

For all working age survivors, a Survivor's Allowance will continue to be paid for the first year following the death of a spouse or civil partner. Under the new conditions, only applicants with a dependent child will receive a Survivor's Pension after the 12 months entitlement to the survivor's allowance.

Who does Social Security Support?

Babies  Children  Working Age

Income Support Child Component  Income Support Child Component  Income Support is an income related supports low income families with the  supports low income families with the  benefit that provides support for those living costs of their children  living costs of their children  looking for work and those in work

towards the cost of living.

Income Support Childcare  Income Support Childcare

Component supports working parents  Component supports working parents  Insolvency Benefit provides financial

with childcare costs of 0 to 11 year  with childcare costs of 0 to 11 year  assistance to employees whose employers olds  olds  become insolvent

Maternity and Adoption Grants  Dental Benefit Scheme helps toward  Back to Work teams provide support, provide a lump sum to help with the  the cost of dental treatment for 11-21  coaching and training to help unemployed general costs of having a baby  year olds  people back into work

Maternity Allowance is a weekly  Student Credits protect pension  Health and Safety Inspectorate ensures payment to help mothers while they  records while students are in full time  employers provide safe working

take time off work to have their baby  education  environments

Home Responsibility Protection  Medical and Pharmaceutical Benefits  Jersey Advisory and Conciliation Service Credits protect pension records for  subsidise the cost of visiting a GP and  provides advice to employers and

people who stay at home to care for a  any medicines prescribed  employees

child

Short-Term Incapacity Allowance is a Medical and Pharmaceutical Benefits  daily benefit which provides income when subsidise the cost of visiting a GP and  a worker is unable to work due to sickness any medicines prescribed

Survivor's Benefits support a spouse or civil partner if their partner dies

Key:

Tax funded Benefit/Service  Medical and Pharmaceutical Benefits Contributory Benefit/Credit  subsidise the cost of visiting a GP and any

medicines prescribed

Health Insurance Benefits

Illness and Disability  Pensioners  

Income Support Medical Components provide  Income Support supports lower income  additional assistance to lower-income  pensioner households  

households that include someone who has a  

long term medical condition  Food Costs* and Cold Weather Bonuses  

provide help with the cost of food items and  Income Support Residential Care helps fund  heating the home for pensioners who don't  the care home fees for people with care needs  pay tax  

and little income or assets to meet those costs  

Christmas Bonus* is a one off payment to all  Housing Adaption Grants help with the cost of  pensioners resident in Jersey  

adaptations to the home of those with  

TV Licence Benefit pays for the TV licence for permanent disabilities

over 75's who don't pay tax

Jersey Employment Trust and Back to Work  

help people with disabilities prepare for, find  65+ Health Scheme subsidises dental, optical  and maintain employment  and chiropody costs for pensioners who  

don't pay tax  

Long-Term Incapacity Allowance and  

Invalidity Benefit support those with a long  Old Age Pension helps to cover basic needs  term illness or disability; either physical or  in old age and is based on contributions paid  mental, both in work and those unable to work  throughout the working life  

Home Carer's Allowance supports carers who  Death Grants help with funeral expenses  give up work to look after someone with high  Medical and Pharmaceutical Benefits  

personal care needs  subsidise the cost of visiting a GP and any  Medical and Pharmaceutical Benefits  medicines prescribed  

subsidise the cost of visiting a GP and any  

medicines prescribed  

Gluten-Free Vouchers help individuals who  

need a gluten-free diet  * Also available to some working age families  

Social Security Overview

The body of this report describes the activities of the Social Security Department:

Collection of contributions from individuals/employers

Administration of funds

Provision of benefits and services

It is divided into five sections:

1. Fund Income Sources, which details the income sources to the four funds administered by the Department
2. Social Security Fund,which details the benefits administered under the Social Security Law
3. Health Insurance Fund,which details the benefits administered under the Health Insurance Law
4. Tax Funded Services/Benefits, which details the services provided and benefits administered through tax funded money, including Income Support and the Back to Work programme
5. Financial Statements, for the four funds administered by the Department as well as tax funded revenue

The figure opposite shows the Social Security revenue sources and demonstrates the financial flow through the funds into the benefits and services. For simplicity it does not show all the financial information, such as investment income, depreciation or administration. These figures are located within the Financial Statements section of the report.

Social Security  Tax Funded Contributions (£185.0m)  Revenue (£181.8m)  

Health  Social Security  Long-Term Care  Insurance Fund  Fund  Fund  

Social Security  (Reserve) Fund  

• Medical Benefits Old Age Pension Income Support  

(£8.8m)  (£154.2m)  (£92.1m)  

• Pharmaceutical Benefit Survivor's Benefits Christmas Bonus (£1.5m)  (£18.1m)  (£4.7m) Food Costs Bonus  
• Gluten-Free Vouchers Death Grants (£0.5m)  (£0.3m)

(£0.3m) Short Term Incapacity Cold Weather Bonus

Allowance (£12.9m)  (£0.3m)  

• Long Term Incapacity 65+ Health Scheme  Allowance (£14.6m)  (£0.2m)  
• Invalidity Benefit TV Licence Benefit  (£9.0m)  (£0.3m)  
• Maternity Grant and Dental Fitness Benefit  Allowance (£2.7m)  Scheme (£0.1m)  
• Home Carer's Allowance 2 other benefits (£0.1m)  (£2.0m)
• Insolvency Benefit

(£1.1m)  

• Transfer of monies to HSS for Employment Services, including;  Primary Care funding (£2.0m)  Back to Work and Jersey  Employment Trust (£8.2m)  
  • Employment Relations, including;  JACS - Jersey Advisory and  Conciliatory Services (£0.5m)  
  • Health and Safety at Work  (£0.5m)  

Figure 1: Flow chart demonstrating the Social Security Department income sources, funds, benefits and services 2013, excluding  administration and other costs  

Section 2 – Fund Income

The Funds administered by the Social Security Department have three sources of income.

1. Contributions collected from working age individuals and their employers
2. A grant from the States to assist with the cost of supplementation
3. Investment income

Contributions

Contributions from working age adults are due on earnings up to pre-defined earnings ceilings;

• A contribution rate of 12.5% is payable on all earnings up to the Standard Earnings Limit (SEL) of £46,008 per year.

For Class 1 contributors (employed) the 12.5% liability is split between the employer (6.5%) and the employee (6.0%). Class 2 contributors (self-employed and others not in paid employment) are liable to pay the full 12.5%.

• Since January 2012 a contribution rate of 2% is payable on earnings between the SEL and the Upper Earning Limit (UEL) of £152,232 per year.

Employers and Class 2 individuals are liable to pay the 2% contribution.

In some situations employees are not required to pay their 6% liability, for example people who are in receipt of an Old Age Pension, people receiving Survivor's Allowance (in the first year of bereavement) and some women married before April 2001.

Income Received from Contributors

Table 3 provides an overview of the contributions received and the number of contributors:

2009  2010  2011  2012  2013 Total of Class 1 contributions below SEL (£000)  163,206  161,463  161,187  164,253  162,719 Total of Class 1 contributions above SEL (£000)  5,121  5,163 Total of Class 2 contributions below SEL (£000)  17,493  17,659  16,169  15,544  14,971 Total of Class 2 contributions above SEL (£000)  1,974  2,136 Total Value of contributions (£000)  180,699  179,121  177,356  186,893  184,988 Average No of Class 1 contributors during year  48,618  48,275  48,359  47,620  47,091 Average No of Class 2 contributors during year  4,291  4,176  3,877  3,783  3,751 Average Class 1 contribution per annum (£)  3,357  3,345  3,333  3,557  3,565 Average Class 2 contribution per annum (£)  4,077  4,229  4,170  4,631  4,561

Table 3: Contributions and contributors, 2009 to 2013

Table 3 and Figure 2 show that both the number of contributors and the monetary value of contributions reduced by 1% in 2013. There was a small increase in contributions above the SEL (£0.2m) but this was offset by reduction in contributions below the SEL (-£2.1m).

Between 2009 and 2013 the value of contributions has risen by 2.4% compared to a 7.5% increase in average earnings over the same period, a real term fall of 4.8%. Without the introduction in 2012 of the extra 2% for earnings between the SEL and the UEL the real term fall in contribution would have been 6.9%

£200 DoDown 1%  DoDown 1%  UpUp 5%  DoDown 1%  

£150

ConContributions f frrom 12. 12.55% rarate

£100

AdAddiititional coconntributions frorom 2% 2% rrate

£50

£0

2009 2010 2011 2012 2013 Figure 2:      

Level of Contributions  

24% 23% 22% 21% 20% 19% 18%

17%

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Figure 3:          

Number of Contributors  

Allocation of Contribution Income

Class 1 and Class 2 contributions are allocated to the Health Insurance Fund and the Social Security Fund according to fixed percentages.  

Employer  Employer  Employee

Fund  Class 1  Class 1  Class 1  (beClloass 2 w SEL)  (abCloass 2 ve SEL)

(below SEL)  (above SEL)  (below SEL)

Health Insurance Fund  1.2%  0.8%  2.0%

Social Security Fund  5.3%  2.0%  5.2%  10.5%  2.0% Total  6.5%  2.0%  6.0%  12.5%  2.0%

Table 4: Percentage allocation of Class 1 and 2 contributions to the Health Insurance Fund and Social Security Fund

Contribution Credits

In some circumstances contribution credits are available to protect people's contribution record and their entitlement to certain Social Security benefits. As well as protecting records during periods in which a contributory benefit is being claimed, credits are also available to:

• People caring for a child at home (1,321 people as at 31 December 2013)
• People over 18 in full-time education (611 people as at 31 December 2013)
• People who have been made compulsorily redundant (59 people as at 31 December 2013)

The most common source of contribution credits is for those caring for a child at home. This is known as Home Responsibility Protection (HRP) and is available for an adult who is not working in order to look after a child under five years old, with a maximum of 10 years of credits available for any one person.

States Grant

Class 1 and Class 2 contributors with earnings below the Standard Earning Limit in a given month, but above the Lower Earnings Limit (LEL) of £808 per month, normally receive a supplement to bring their contributions up to the Standard Earning Limit. This "top-up" of contributions protects pensions and benefit entitlement for lower and middle income earners, and is known as supplementation.

The States provides an annual grant to the Social Security Fund. Up to 2010, the value of the States Grant was based on the exact cost of supplementation for the year in question. In 2011 a new method of calculating the value of the States Grant was established. This introduced certainty to the level of States contribution by setting the States Grant for 2011 and basing 2012 and future years on a formula set out in the law.

As part of the Fiscal Strategy Review, the States agreed to introduce a 2% contribution rate for employers and Class 2 contributors between the Standard Earnings Limit and Upper Earnings Limit, with the additional contribution income collected used to reduce the level of the States Grant and cover some of the cost of supplementation. This had led to the value of the States Grant for 2012 and 2013 being at a lower level than previous years due to the extra contributions raised through the introduction of the new 2% rate. This can be seen in Table 5, where the States Grant had previously represented 30-31% of the total income into the Social Security Fund (excluding investment income), whereas since 2012 it only represented 28%. The total value of the States Grant plus contributions above the SEL was £69.5m, compared to the actual cost of supplementation of £69.2m. Small differences in the funding of supplementation will even out over the lifetime of the Social Security Fund.

Cost of supplementation  64,995  66,667  66,072  68,206  69,234  

Table 5:    

Social Security (Reserve) Fund Investments  

Method of Investment  

http://www.gov.je/Government/Pages/StatesReports.aspx?ReportID=1066

Investment Asset Split within the Social Security (Reserve) Fund  

Absolute Return  Long Term

Bond Pool,  Cash & Cash

£105.2m  Equivalents, £4.8m  L&G Passive UK Corporate  Cash Unit Trust,

Bond Pool, £0.1m  £50.4m

UK Equities Pooled Property II  II Pool, £143.4m

Pool, £23.1m

L&G Passive Equity

Unit Trust, £216.0m  Global Equities £1,157.7m I Pool, £184.9m

Global Equities III Pool, £23.4m

Pooled Global

Equity Pool, £78.6m  Global Equities

Passive Global  II Pool, £164.2m Equities Pool,

£163.6m

Figure 4:        

2013 Performance

30%

24.6%  23.1%  

25%

20.2%  19.0%  

20%

15% 13.6%  13.4%  Fund Performance

Benchmark Performance 10%

5%

0%

Inside CIF Outside CIF Overall performance

Figure 5:    

Health Insurance Fund Investments  

Method of Investment  

Investment Asset Split in the Health Insurance Fund  

Absolute Return  Long Term Bond Pool,  Cash & Cash £11.2m  Equivalents,

£10.5m

UK Corporate

Bond Pool,  £78.7m UK Equities

£22.5m  II Pool, £16.6m

Global Equities Passive Global  I Pool, £8.3m Equities Pool,  Global

£2.4m  Equities

II Pool, £7.2m

Figure 6: Health Insurance Fund investment asset holdings as at 31 December 2013

2013 Performance

The Health Insurance Fund holds a balanced portfolio, with diversification across three key asset classes. Equities are expected to generate, on average, a higher level of return and grow the value of the Fund in real terms though in the short term they can exhibit a higher level of volatility due to market fluctuations. Cash is expected to generate a low return but acts to preserve the capital value of the fund, reduce the portfolio's overall volatility and provide the fund with any required liquidity. Corporate bonds are expected to generate a higher level of return than the cash holdings but at a lower level of volatility than the equity investments.  

2013 saw gains of £8.7 million earned on the overall portfolio, a net gain of 12.4%, up from £8.4 million over 2012. The return of the Fund represented both high returns in the markets but also good investment manager performance with net returns exceeding the pool's overall benchmark by just over 2%. Performance was not evenly spread between asset classes with the majority of investment gains attributable to equity type assets. Equity type assets generated £7.8 million of the Fund's total gain with corporate bonds earning a return of just under £0.8 million. Earnings of the cash investments remained low reflecting the continuing low interest rate environment. The bond holdings of the HIF were restructured during the year with units in the underperforming Long Term and Short Term Corporate Bond Pool replaced with units in the new Absolute Return Bond and UK Corporate Bond Pool. The new classes were established late in the year and made a negative contribution to the overall investment return when restructuring costs are included.

The performance of the Fund has been detailed below relative to the combined benchmark. The net performance of the fund is in excess of benchmark both in the current year and since investment in the CIF.

14% 12.4%

12% 9.9%

10%

8% Fund Performance

6%

Benchmark Performance 4%

2%

0%

Overall Performance

Figure 7: Performance of Health Insurance Fund investments over 2013 compared to benchmark

Section 3 – Social Security Fund Benefits (SSF)  

Old Age Pensions  146,139  154,229  

Long term incapacity allowance  13,416  14,567  

Home Carer's Allowance  0  1,968  

Death grant  482  483  

Table 6:          

SSF – Old Age Pensions (OAP)  

The new methodology in uprating only applies to old age pensions. All other benefits within Social Security legislation that refer to the standard rate benefit will continue to be uprated by the index of average earnings.

The current pension age is 65, with an option to take a reduced rate pension up to two years early. At present some women continue to have a pension age of 60, if they were registered for Social Security purposes before 1975. In 2011 the States agreed to increase the pension age in Jersey from 2020, with the pension age rising by two months per year, increasing the age from 65 to 67 by 2031.

Just over three-quarters (£154.2 million) of Social Security benefit expenditure is in respect of old age pensions. This cost is growing year on year as the number of pensioners increases. At the end of 2013 there were 29,052 pensions in payment. There has been a 12% increase in the number of pensions paid between 2009 and 2013 and an 9% increase in the rate of the pension leading to an overall increase of 22% in the total cost of pensions over this time.

Year  2009  2010  2011  2012  2013

Value of Old Age Pensions Paid

126,390  132,760  137,956  145,616  154,229 £000's

Weekly full (100%) Old Age  £178.01  £179.97  £184.45  £187.25  £193.48 Pension rate at year end £

Table 7: Pension comparisons, 2009 to 2013

The number of pensions in payment rose by over 3% (922) during 2013, which is a similar rate to the previous years. This gradual increase is shown in Figure 8.

30,000 29,000 28,000 27,000 26,000 25,000 24,000

Up 3%

2009 2010 2011 2012 2013 Figure 8: Number of Old Age Pensions in payment at year end, 2009 to 2013

Demographics of Old Age Pensioners

The female to male ratio slowly increases with age, reflecting the fact that, on average, women live longer than men. Of the 211 pensioners aged 95 or over, 177 (84%) are female.

10,000 8,000 6,000 4,000

Male Female

2,000 0

60 - 64 65 - 74 75 - 84 85 - 94 95 + Figure 9: Number of pensioners by age bracket as at 31 December 2013

Old Age Pension Payments  

4,635  

16%  

17,166  

5,95221%  59%  

Figure 10:          

86% of Jersey residents receive a pension of over 50% of the full  pension compared to only 16% of non Jersey residents.  

7,000

6,000

5,000 Not Resident 4,000 in Jersey 3,000 Resident in

2,000 Jersey

1,000

0

Figure 11:            

Jersey  126,481  82%  17,166  59%  

Rest of world  13,719  9%  5,934  20%  

Table 8:  

SSF – Survivor's Benefits and Death Grants

Two types of survivor's benefits are paid; Survivor's Allowance and Survivor's Pension. These benefits are paid on a percentage basis to survivors based on the contribution record of their deceased spouse or civil partner and are mainly paid to survivors while they are of working age. Survivor's Allowance is paid to a survivor for the first 52 weeks following bereavement and is paid at 20% above the standard rate of benefit. After the first 52 weeks, Survivor's Allowance is replaced by Survivor's Pension which is paid at the standard rate of benefit. Survivor's benefits are not paid if the survivor remarries, co-habits or enters another civil partnership and ceases when the survivor reaches pension age. As of 1st January 2013 the eligibility for Survivor's Pension changed and the benefit is now only payable to people with dependent children. People already in receipt of Survivor's Pension or Allowance and people born before 1 January 1957 are not affected by this change.

Type of Benefit  No. of Claimants  Average Weekly Claim Rate £ Survivor's Allowance  89  153.74

Survivor's Pension  817  99.42

Total  906  104.76

Table 9: Number of claimants of survivor's benefits and average weekly claim rates as at 31 December 2013

Survivor's benefits are paid worldwide. Although 56% of the total number of survivor's benefits are paid in Jersey, 72% of the total value of survivor's benefit is paid in Jersey, as shown in Figures 12 and 14. The majority of survivor's benefits are paid to women (86%), as shown in Figure 13.

Other Other  Other  Countries

Other  Countries  UK  European  3% European  3%  8%  Countries

Countries  17%

UK  29%

12%

Jersey  Jersey 56%  72%

Figure 12: Survivor's benefits claimant numbers by location in  Figure 14: Survivor's benefit value by location in 2013 payment as at 31 December 2013

Male 14%

Female 86%

Figure 13: Survivor's benefits by gender in payment as at 31 December 2013

Total Value of Death Grants  

477  511  472  482  483  £000  

Table 10:      

SSF – Short Term Incapacity Allowance (STIA)  

Cost of STIA Claims £000  12,553  12,736  12,692  13,650  12,938

32,000 21 30,000 20 28,000 19 26,000 18 24,000 17 22,000 16 20,000 15

2009 2010 2011 2012 2013

No. of STIA claims paid Average length of claim (days)

Figure 15:            

STIA covers a wide range of short-term illnesses and injuries. 27% of all claims during the year related to infectious illnesses, an increase from 24% in 2012. These claims lasted an average of 7.6 days. By contrast, depression, stress and anxiety accounted for 9% of the claims but 20% of the number of days, with an average duration of over six weeks per claim. Table 12 details some of the most common reasons for STIA claims in 2013:

% of all 2013  No. Of Claims  No. Of Days  Average Claim

2013 STIA Reason for Claim

Claims Paid  Paid  Paid  Length (Days)

Infections  27%  6,952  53,083  7.6 Hospital treatment  15%  3,809  96,251  25.3

Table 12: Most common reasons for claiming STIA in 2013

Some individuals have a long term health condition that lasts for more than a year. These claimants can apply for

Long Term Incapacity Allowance (LTIA). Whereas STIA can only be paid if an individual is not working (on the day the benefit is claimed), LTIA claimants can return to work or stay in work and continue to claim the benefit.

SSF – Long Term Incapacity Allowance (LTIA) and Invalidity Benefit (INV)

These benefits are paid to working age people who satisfy the necessary contribution conditions and who have a long term loss of faculty3. The amount of benefit for LTIA is determined on a percentage basis. The maximum value

of the benefit (100%) is set at the standard rate of benefit. In October 2013 the rate rose from £187.25 per week to £191.38 per week.

A minority of claimants will be assessed at 100% for a major loss of faculty. Most claimants are assessed at a lower percentage, in 5% bands. Figure 16 illustrates that awards of 20% are the most common. Awards of up to 15% are paid as lump sum payments.

500 450 400 350 300 250 200 150 100 50 0

5% 10% 15% 20% 25% 30% 35% 40% 45% 50% 55% 60% 65% 70% 75% 80% 85% 90% 95% 100% Figure 16: Number of LTIA claims in payment by rate % as at 31 December 2013  

The average percentage rate of assessment for LTIA claims in payment in 2013 is 37% and this percentage has remained more or less constant over the last five years.

As with STIA, LTIA covers a wide range of illnesses and injuries. Depression is by far the most common condition, accounting for 17% of all claims. Back pain and back injuries combined accounted for 13% of all claims. Table 13 identifies the most common conditions in 2013.

3 The extent of incapacity is assessed by reference to the loss of faculty arising from a disease or injury

Depression  605  17%  39%  

Table 13:  

4,000

3,500

3,000

2,500 No. of Invalidity claims in

payment at year end 2,000

No. of LTIA claims in 1,500 payment at year end

1,000

500

0

Invalidity  

1,219  1,086  967  859  759  claims  

Figure 17:      

SSF – Maternity and Adoption Benefits

A Maternity Grant (or Adoptive Parent Grant) is paid to help with the initial general costs of having a baby. The Grant is available as a lump sum to either the father or mother who satisfies the contribution conditions. The value in 2013 was £561.75, rising to £574.14 from 1 October 2013. Multiple grants are provided in the case of multiple births. The great majority of parents having a baby in 2013 received a Maternity Grant from the Department. 1,017 births were recorded in 2013 with 970 maternity grants being paid by the Department in 2013. The following Figure shows the nationality of those in receipt of Maternity Grants in 2013:

7%

2%

4%

Jersey/British

9%  Portuguese

Polish

Irish

13%

65%  Other European Countries

Other Countries

Figure 18: Maternity grants by nationality

2%  5%

4%

Jersey/British

5%

Portuguese

11%  Polish

Irish

Other European Countries

71%  Other Countries

Figure 19: Nationality of working age (16-64) population registered with the Social Security Department

Just under two-thirds of parents receiving Maternity Grants have British nationality, with the remainder reflecting the nationalities of the local workforce. The average age of a woman in receipt of Maternity Benefit in 2013 was 32. Grants were paid in respect of 10 cases of twins born in 2013.

A weekly Maternity Allowance can also be payable to the mother. This can be paid for up to 18 weeks, at the same rate as STIA, but based on only the mother's contribution record before she became pregnant.

Indicator  2009  2010  2011  2012  2013 No. of Maternity Allowance claims starting in the year  869  940  944  982  894 No. of Maternity Grant claims paid in the year  968  1,014  1,056  1,011  970 No of Births Recorded  1,169  1,194  1,102  1,123  1,017

Table 14: Maternity indicators, 2009 to 2013

SSF – Home Carer's Allowance (HCA)  

Female  154  50  

Table 15:  

SSF – Insolvency Benefit  

Section 4 – Health Insurance Fund Benefits (HIF)

The Health Insurance Fund provides benefits to local residents in respect of specific primary care costs. The full range of benefits and the cost of these benefits for 2013 are as follows:

Health Insurance Fund  2201012  2201013

££000000  ££000000

Mediical cal Beneffit it – GPP lettttersrs oof rreferrarral  1,0001,000  774747 Mediical cal Beneffit it – pathollogyogy beneffitit  886666  887878 Pharmaceutaceutical ical Beneffit it - drug costs  11,742  11,901 Pharmaceutaceutical ical Beneffit it - diisspensiinngg ffees  5,6565,656  6,2206,220 Glluutenten-frreee Voucchhers  222222  225656 Total benefit expenditure  26,712  27,213

TTaable 16:16: Heaaltlth InInsurranance Fund benefitt eexpenditurree for r 2012012 2 anand 2013

££000000  ££000000

In 2201013 t3 there was a £2,000,000,000 ttraransferr frroom tthe HHeaallth Insurraanccee FuFund tto HHealalth aand SoSocial Sercial Servicices tto fufund pririmmary care services prrooviidded bby tthaatt Department.

HIF – Medical Benefits (GP Consultations and Letters of Referral)

A standard benefit is paid in respect of each GP consultation covered by the Health Insurance Fund. Throughout 2013 the value of the benefit was set at £20.28. Additionally a separate benefit, paid at the same rate, is available in respect of the cost of a letter of referral written by a GP to a hospital consultant or other specialist.

2009  2010  2011  2012  2013 No of GP consultations  379,377  355,094  363,089  363,601  351,099

Cost of Medical Benefits for

5,739  6,222  6,885  7,226  7,211 GP consultations £000

Table 17: Volumes and costs of GP visits and consultations, 2009 to 2013

Whilst the number of GP consultations has remained quite consistent over the past five years the cost of the associated Medical Benefit has risen in line with the agreed increases in the value of Medical Benefit. This has resulted in a 26% increase in cost between 2009 and 2013.

4 The increase in the value of the Medical Benefit in 2010 was agreed as part of a comprehensive project to improve the governance of local GPs in line with the requirements of the UK General Medical Council.

HIF – Pathology Laboratory Benefit  

No. of Pathology Laboratory benefit claims paid  

73,872  80,075  84,562  88,763  during year  

Value of Pathology Laboratory benefit on 31  

10.00  10.00  10.35  10.35  

December £  

Table 18:    

HIF – Pharmaceutical Benefit  

Tdoutrianl g Nyoe. aorf items prescribed  1,590,227  1,651,355  1,707,644  1,784,798  1,846,713  

Table 19:      

1,901,900,0000,000 1,851,850,0000,000 1,801,800,0000,000 1,751,750,0000,000 1,701,700,0000,000 1,651,650,0000,000 1,601,600,0000,000 1,551,550,0000,000 1,501,500,0000,000 1,451,450,0000,000

Up 3%

202009 202010 202011 202012 202013 Figure 20: Annual pharmaceutical items prescribed, 2009 to 2013

Types of Drugs Prescribed

Figure 21 shows that the most commonly prescribed medicines in 2013 were those relating to heart disease. This group of medicines covers a wide range of disease areas, including cholesterol lowering medicines, treatments for high blood pressure, and anticoagulants that thin the blood. Increasing use of such medicines reflects our ageing population and a greater emphasis, through the development of evidence based guidelines, on the use of medicines to prevent heart disease.

Cardiovascular System 18%

Central Nervous System 32%  Gastro-Intestinal System

7%

Endocrine System

7%  Respiratory System

Infections

9%

16%  Others

11%

Figure 21: Volume of items prescribed by medicine category in 2013

The total number of items dispensed increased by 3% on the previous year. Similar increases were seen across the top 4 most prescribed drug types. It is encouraging to see a fall in the number of antibiotics dispensed in line with local and national recommendations.

Number of items  Change from Drug type  prescribed  2012

Drugs to treat high blood pressure and heart failure (ACE  150,085  +2% inhibitors)

Statins and other drugs to reduce cholesterol  143,971  +4%

19%  17%  5%  

17%  25%  

10%  7%  

Figure 22:    

HIF – Gluten-free Scheme  

Number of gluten-free  

266  281  311  373  423  claimants  

Average cost per claimant  

580  640  596  595  607  £  

Table 21:      

£300,000 450

400

£250,000

350

£200,000 300 Cost of Gluten-Free

250 Vouchers £150,000

200 Number of Gluten- £100,000 150 Free Claimants

100

£50,000

50 £0 0

Figure 23:          

Section 5 – Tax Funded Services and Benefits

The Department delivers a range of "tax-funded" benefits and services that are funded directly by the States of Jersey, shown in Table 22:

2012  2013 £000  £000

Employment Services, including Back to Work and JET  4,843  8,168 Services  Employment Relations and JACS  524  525 Health and Safety at Work  495  492

Income Support: Weekly Benefit  71,349  72,953 Income Support: Residential & Nursing Care Fees  16,694  16,722 Income Support: Transition (Protected) Payments  1,060  490 Income Support: Special Payments  1,530  1,210 Income Support: Cold Weather Payments  562  695

Benefits  Invalid Care Allowance  2,720  - Christmas Bonus  1,399  1,464

Food Cost Bonus  302  283 Cold Weather Bonus  290  324

Jersey 65+ Health Scheme  251  234 TV Licence Benefit  246  276

Other Benefits (under £100,000 each)  243  164 States Grant  Contribution to Supplementation – Social Security Fund  61,150  62,200

States Grant  Contribution to Long Term Care Fund  -  11,700

Table 22: Tax-funded expenditure (excluding administration) for 2012 and 2013 Contribution to Long Term Care Fund (LTCF)

Underspends against budget principally for Income Support enabled a contribution to the LTCF of £11.7 million which had not been originally budgeted. This will allow benefits to be introduced in July 2014 but contributions to the LTCF to be delayed until January 2015 and then introduced at a reduced rate.

5 £2,353,859 recharge to the Health Insurance Fund of Medical Benefit incorrectly charged to Income Support expenditure in prior years

Tax Funded Services – Back to Work  

Introduction