Budget transfer from Central Contingencies to Treasury and Resources Department: Public Employees Contributory Retirement Scheme: Pre-1987 Debt

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[THIS DECISION RESCINDS MD-TR-2017-0126] A decision made on 19 October 2018

Decision Reference: MD-TR-2018-0127
Decision Summary Title:	Contingency Funding for PECRS Pre-1987 Debt repayments		Date of Decision Summary:	16th October 2018
Decision Summary Author:	Head of Decision Support		Decision Summary: Public or Exempt?	Public
Type of Report: Oral or Written?	Written		Person Giving Oral Report:	N/A
Written Report Title:	Contingency Funding for PECRS Pre-1987 Debt repayments		Date of Written Report:	16th October 2018
Written Report Author:	Finance Manager – Treasury and Taxes Office		Written Report : Public or Exempt?	Public
Subject: The allocation of up to £301,600 from Central Contingencies in 2018 to the Treasury and Resources Department for costs associated with the PECRS Pre- 1987 Debt repayments.
Decision(s): The Minister approved the allocation of up to £301,600 in 2018 from Central Contingencies to the Treasury and Resources Department for the costs associated with the PECRS Pre- 1987 Debt repayments.
Reason(s) for Decision: Article 17(2) of the Public Finances (Jersey) Law 2005 states that the Minister for Treasury and Resources is authorised to approve the transfer from contingency expenditure or the insurance fund of amounts not exceeding, in total, the amount available for contingency expenditure in a financial year. The current Contingency Allocation Policy (published as R.112/2018) sets the requirement for all allocations from contingency over £50,000 to be considered by the Investment Appraisal Board, Principal Accountable Officer and States Treasurer prior to submission to the Minister for approval. The Board recommended this request for approval at its meeting of 11th October 2018. The request has also been recommended for approval by the Principal Accountable Officer and States Treasurer. This allocation to Contingency was approved as part of the 2016 year end carry forwards request (MD-TR-2017-0068). The Minister has previously approved a transfer of up to £140,000 from the PECRS Pre-1987 Contingency to the Treasury and Resources Department head of expenditure to fund the budget shortfall identified in 2017 (MD-TR-2017-0126). The department has since confirmed that it was able to meet the 2017 budget shortfall for PECRS Pre-1987 Debt repayments from underspend areas within the Treasury based budget, therefore MD-TR-2017-0126 has never been executed. This Ministerial Decision therefore also rescinds MD-TR-2017-0126.
Resource Implications: The Treasury and Resources Department revenue head of expenditure to increase by up to £301,600 in 2018 and Central Contingencies to decrease by the same amount. This decision does not change the total amount of expenditure approved by the States in the Medium Term Financial Plan 2016 to 2019.
Action required: The Head of Decision Support to advise the Finance Manager and the Finance Director of the Corporate Group that this decision is approved.
Signature:		Position: Deputy Susie Pinel Minister for Treasury and Resources
Date Signed:		Date of Decision:

Budget transfer from Central Contingencies to Treasury and Resources Department: Public Employees Contributory Retirement Scheme: Pre-1987 Debt

States Treasury and Exchequer

Ministerial Decision Report

CONTINGENCY FUNDING FOR PECRS PRE-1987 DEBT REPAYMENTS

Purpose of Report

To enable the Minister for Treasury and Resources to approve the allocation of up to £301,600 in 2018 from Central Contingencies to the Treasury and Resources Department for the costs associated with the PECRS Pre-1987 Debt repayments.

Background

Pensions expenditure within the States Treasury Department relates to past service liabilities and payments to pensioners under Pre-1967 and Pre-1987 Schemes.

The Pre-1987 Scheme was created in 1987 as a result of changes proposed to Jersey’s public sector pension arrangements. Public Employees Contribution Retirement Scheme (PECRS) took on the liability for paying increases accrued in respect of services prior to 1987. The increase could not be funded by the States and created a liability in pensions. To eliminate that liability the States agreed that from 1 January 2002 the employer’s contribution rate of 15.6% of pensionable earnings would be split into 13.6% to cover the cost of future benefits and 2% would be allocated to paying off the Pre-1987 Debt. It is expected that in this way the debt will be eliminated over an 82 year period.

The PECRS Pre-1987 Debt repayments increase annually by the percentage increase in pensionable earnings of those contributing scheme members who were employed during the whole of the preceding year. The level of debt repayments is variable between years and finalised during the year of payment. This creates volatility in the level of repayments due. Repayments are impacted by the level of pay awards, incremental increases and re-organisations.

The total budget allocated for the PECRS pre-1987 Debt in 2018 is currently £7,308,012 against the projected spend of £7,622,895 resulting in a budget shortfall of £314,883.

The overall Treasury and Resources position reviewed to 30 September 2018 and additional budget pressures already identified but not yet included in the forecast for the period between October and December 2018, indicate that the current year’s budget shortfall for PECRS Pre-1987 Debt repayments cannot be met from the based budget underspends.

In 2018 the Minister approved an allocation within Contingency for PECRS Pre-1987 Debt repayments. The purpose of the contingency, created from 2016 carry forwards of £301,600, is to cover PECRS Pre-1987 Debt repayments budget shortfalls in future years.

The Treasury Minister has previously approved a transfer of up to £140,000 from the PECRS Pre-1987 Contingency to the Treasury and Resources Department head of expenditure to fund the budget shortfall identified in 2017 (MD-TR-2017-0126). The department has since confirmed that it was able to meet the 2017 budget shortfall for PECRS Pre-1987 Debt repayments from underspend areas within the Treasury based budget, therefore that Ministerial Decision was never executed. This Ministerial Decision therefore rescinds Ministerial Decision MD-TR-2017-0126.

Recommendation

The Minister is recommended to approve the allocation of up to £301,600 in 2018 from Central Contingencies to the Treasury and Resources Department for the costs associated with the PECRS Pre-1987 Debt repayments.

Reasons for Decision

Article 17(2) of the Public Finances (Jersey) Law 2005 states that the Minister for Treasury and Resources is authorised to approve the transfer from contingency expenditure or the insurance fund of amounts not exceeding, in total, the amount available for contingency expenditure in a financial year.

The current Contingency Allocation Policy (published as R.112/2018) sets the requirement for all allocations from contingency over £50,000 to be considered by the Investment Appraisal Board, Principal Accountable Officer and States Treasurer prior to submission to the Minister for approval. The Board recommended this request for approval at its meeting of 11th October 2018. The request has also been recommended for approval by the Principal Accountable Officer and States Treasurer. This allocation to Contingency was approved as part of the 2016 year end carry forwards request (MD-TR-2017-0068).

The Minister has previously approved a transfer of up to £140,000 from the PECRS Pre-1987 Contingency to the Treasury and Resources Department head of expenditure to fund the budget shortfall identified in 2017 (MD-TR-2017-0126). The department has since confirmed that it was able to meet the 2017 budget shortfall for PECRS Pre-1987 Debt repayments from underspend areas within the Treasury based budget, therefore MD-TR-2017-0126 has never been executed. This Ministerial Decision therefore also rescinds MD-TR-2017-0126.

5. Resource Implications

The Treasury and Resources Department revenue head of expenditure to increase by up to £301,600 in 2018 and Central Contingencies to decrease by the same amount.

This decision does not change the total amount of expenditure approved by the States in the Medium Term Financial Plan 2016 to 2019.

Report author : Finance Manager – Treasury and Taxes office	Document date : 11th October 2018
Quality Assurance / Review: Head of Decision Support	File name and path: L:\Treasury\Sections\Corporate Finance\Ministerial Decisions\DS, WR and SD\2018-0127 - Contingency funding for PECRS pre-1987 debt repayments
MD sponsor : Director of Financial Planning and Performance

Appendix 1 – 2016 Year End Carry Forwards Report - extract