|Governor proposes changes to government pensions||| Print ||
|Thursday, 09 February 2012 10:26|
His Excellency the Gov. Ric Todd and the Advisory Council have agreed to a series of proposed improvements and amendments to civil service pensions.
After a council meeting Feb. 8, proposed changes were announced that are aimed at stopping payments people should not have been receiving, improving long-term pensions and reducing the cost to government over the next five years.
The proposals will have to go before the Consultative Forum for consideration before they are implemented.
Changes to pensions have been a sticking point between the interim government and the Civil Service Association (CSA), which represents about one third of all government workers. The governor said the CSA has seen the proposals but does not agree with all of them.
Many of the proposals have already been made public over the last year, including changes to the retirement age, gratuities and calculation of benefits.
Improving civil servants’ non-contributory pensions
Introduction of a pension for persons employed after April 1992 and who retire aged 55
Civil servants retiring at 55 years of age who had been employed after April 1992 were not eligible to a pension until they reached 60 years of age. An actuarially assessed temporary pension will be introduced for this group. It will be to the value of 75 percent of the pension they would have received had they been eligible under the Pensions Ordinance for a pension at 55 years of age, and 100 percent from age 60.
It will not include the option to commute any sums into a gratuity and will continue to receive this until they reach the age of 60 years when they will be eligible to access their National Insurance Board (NIB) pension.
Phased increase over 5 years to the retirement age for civil servants from 55 to 60 years old
Civil servants are currently required to retire at 55, but for those employed after April 1992 this leaves a gap of five years before they are eligible for their NIB pension. In some cases in the past, retired civil servants who had been employed after April 1992 had received a full pension erroneously administered under the Pensions Ordinance.
To address these problems, the retirement age for civil servants will be brought into line with the wider TCI public. However, those members of staff who were 50 years old on April 1, 2011, may still retire at 55 if they wish to do so, unless they wish to remain in their employment subject to the agreement of government.
Phased elimination of gratuities (a lump sum payment resulting in a lower final pension) for persons retiring over the next five years
It is not normal practice for gratuities to be paid from a non-contributory scheme. The elimination of gratuities will ensure that persons retiring have continued access to the maximum monthly pension payments available to them. It will also reduce the cost to TCI tax payers by $3 million over the next five years by scaling back the need to upfront one-off payments that have an impact of the overall annual budget.
Provide death in service and post retirement benefits to persons employed post April 5, 1992
Civil servants employed before the introduction of the NIB Ordinance were eligible for death in service and post retirement benefits such as gratuities. These benefits were not available to those employed after April 1992. These rights are now being extended to all civil servants.
Ending erroneous, anomalous benefit payments
The changes to pension benefits which should ensure fairer administration for all current and retired civil servants are:
Removal of housing allowances from the calculation of pension benefits
Housing allowances are designed to reimburse the short term costs incurred by some civil servants who are obliged to move home for their job. Including housing allowances in the total assessment of individual pension benefits is unfair to those civil servants who have had no need for this allowance.
Ending pension gratuity payments for female civil servants who stop working when they marry
This is an old provision designed to provide a one-off pension payment to women when they got married in anticipation that they would stop working to raise a family. The benefit is out of date — many women clearly continue working after they get married — and discriminatory and unfair to male employees.
Identify where benefits have been paid in error and write-off these payments
Retired civil servants, employed after April 1992, who have been in receipt of $1.5 million of unlawfully paid gratuities and pensions under the Pensions Ordinance will not be penalized. Where payments are due to administrative error, they will be stopped — if ongoing.
It is not considered appropriate to recover these sums from pensioners as the recovery costs are larger than the amount outstanding. Erroneous payments will be validated and written-off.
Ending the payment of pensions to civil servants reemployed by the government after they have retired
The 2011 pension review identified cases of civil servants who had been re-employed by government after they had retired aged 55 and who were still collecting a pension. Retired civil servants who were employed before April 1992 are entitled to the pension earned before that date under the government Pension Scheme. However, under Pensions Ordinance, they are not allowed to receive that pension if they are re-employed by government.
They will continue to receive their government pension once they stop working for government entirely. The payment of their government pension while they continue to be employed effectively doubles their income at a cost to the TCI taxpayer. The Pensions Ordinance will be amended to clarify this position.
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