PECRS Pre-87 debt: Reserve Funding for increases

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A decision made on 27 July 2021

Decision Reference: MD-TR-2021-0087
Decision Summary Title:	Reserve Funding for increases to PECRS Pre-87 debt		Date of Decision Summary:	14th July 2021
Decision Summary Author:	Specialist – Business Cases		Decision Summary: Public or Exempt?	Public
Type of Report: Oral or Written?	Written		Person Giving Oral Report:	n/a
Written Report Title:	Reserve Funding for increases to PECRS Pre-87 debt		Date of Written Report:	14th July 2021
Written Report Author:	Specialist – Business Cases		Written Report: Public or Exempt?	Public
Subject: The allocation of up to £510,000 from the General Reserve to the Treasury and Exchequer (T&E) Head of Expenditure to cover the increases to the PECRS Pre-87 debt.
Decision(s): The Minister approved an allocation of up to £510,000 from the General Reserve to the T&E Head of Expenditure for increases to PECRS Pre-87 debt.
Reason(s) for Decision: Article 15(3) of the Public Finances (Jersey) Law 2019 states that the approval by the States of a Government Plan authorises the Minister to direct how an approved appropriation for a reserve head of expenditure in the plan may be spent (including on another head of expenditure) in the first financial year covered by the plan. The current Policy for Allocations from the Reserve, presented to the States Assembly as R.60/2021, sets the requirement that all allocations from the General Reserve are recommended for approval by the Treasurer of the States, taking into account comments from the Principal Accountable Officer (PAO), prior to submission to the Minister for approval. Where a request for funding is made by Treasury and Exchequer, the Policy requires that the Principal Accountable Officer also recommends the request to the Minister. If the Minister is minded to approve a funding allocation, the draft Ministerial Decision will be circulated to the Council of Ministers five working days before a Ministerial Decision is signed and published. The Investment Appraisal Team has reviewed the business case for this request and recommended it for approval. Following this review, the Treasurer and the PAO recommend that the Minister allocates funding from the General Reserve.
Resource Implications: The T&E Head of Expenditure to increase by £510,000 and the General Reserve to decrease by an identical amount. The recurring effects of this allocation will be addressed and considered as part of the process to develop the Government Plan 2022-25. This decision does not change the total amount of expenditure approved by the States in the Government Plan 2021-24.
Action required: The Head of Financial Governance to advise the Specialist – Business Cases and the Head of Finance Business Partnering for T&E that this decision is approved.
Signature:		Position: Deputy S J Pinel, Minister for Treasury and Resources
Date Signed:		Date of Decision:

PECRS Pre-87 debt: Reserve Funding for increases

Treasury and Exchequer

Ministerial Decision Report

Reserve Funding for increases to PECRS PRe-87 Debt

Purpose of Report

To enable the Minister to approve the allocation of up to £510,000 in 2021 from the General Reserve to the Treasury and Exchequer (T&E) head of expenditure to cover increases to PECRS Pre-87 debt.

Background

The Government is required to fund the repayment of the PECRS Pre-87 debt which was created when responsibility for funding pension increases to PECRS pensions in payment moved from the Government to the Pension Fund in 1987.

The repayment mechanism for the PECRS Pre-1987 debt initially had a repayment date of 2083. The Medium Term Financial Plan (MTFP) 2013-15 included an additional £1 million in 2013, rising to £2 million in 2014 and to £3 million in 2015. These increases to the base budget for repayment reduced the term by 29 years delivering a cost reduction of £1.7 billion over the lifetime of the debt. As a result, the PECRS Pre-87 debt repayment date was brought forward to 2053 and this earlier repayment date is included in pension scheme regulations.

The base budget needs to be increased each year to meet the statutory requirement to repay the debt and deliver the cost reductions identified in MTFP 2013-15. Prior to the start of each year the actual increase in pensionable salaries is estimated and debt repayments increased. In October each year, the estimate is reviewed by the Scheme Actuary to establish any final balancing payment. The base budget needs to be increased in 2021 by £510,000 and in future years.

A growth bid has been submitted as part of the Government Plan 2022-2025 process which captures the future years pressures as shown in the table below:-

Year	2021	2022	2023	2024	2025	Total
Base Budget (£,000)	8,344	8,344	8,344	8,344	8,344	41,720
Budget Req’d (£’000)	8,854	9,310	9,789	10,294	10,824	49,071
Difference (£’000)	510	966	1,445	1,950	2,480	7,351

Recommendation

The Minister is recommended to approve the allocation of up to £510,000 from the General Reserve to the Treasury and Exchequer (T&E) Head of Expenditure to cover the increases to PECRS Pre-87 debt.

Reason for Decision

Article 15(3) of the Public Finances (Jersey) Law 2019 states that the approval by the States of a Government Plan authorises the Minister to direct how an approved appropriation for a reserve head of expenditure in the plan may be spent (including on another head of expenditure) in the first financial year covered by the plan.

The current Policy for Allocations from the Reserve, presented to the States Assembly as R.60/2021, sets the requirement that all allocations from the General Reserve are recommended for approval by the Treasurer of the States, taking into account comments from the Principal Accountable Officer (PAO), prior to submission to the Minister for approval. Where a request for funding is made by Treasury and Exchequer, the Policy requires that the Principal Accountable Officer also recommends the request to the Minister.

If the Minister is minded to approve a funding allocation, the draft Ministerial Decision will be circulated to the Council of Ministers five working days before a Ministerial Decision is signed and published.

The Investment Appraisal Team has reviewed the business case for this request and recommended it for approval. Following this review, the Treasurer and the PAO recommend that the Minister allocates funding from the General Reserve.

Resource Implications

The T&E Head of Expenditure to increase by £510,000 and the General Reserve to decrease by an identical amount.

The recurring effects of this allocation will be addressed and considered as part of the process to develop the Government Plan 2022-25.

This decision does not change the total amount of expenditure approved by the States in the Government Plan 2021-24.

Report author: Specialist – Business Cases

Document date: 14th July 2021

Quality Assurance / Review:

Group Director, Strategic Finance and the Head of Financial Governance

File name and path: L:\Treasury\Sections\Corporate Finance\Ministerial Decisions\DS, WR and SD\2021-0087 - Reserve funding for PECRS Pre-87 Debt

MD sponsor: Treasurer of the States