Central Contingencies transfer to Treasury and Exchequer Department: Public Employee Contributory Retirement Scheme

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A decision made 21 June 2019:

Decision Reference: MD-TR-2019-0044
Decision Summary Title:	The allocation of funds from Central Contingencies in 2019 to the Treasury and Exchequer Department		Date of Decision Summary:	20th May 2019
Decision Summary Author:	Head of Financial Governance		Decision Summary: Public or Exempt?	Public
Type of Report: Oral or Written?	Written		Person Giving Oral Report:	N/A
Written Report Title:	The allocation of funds from Central Contingencies in 2019 to the Treasury and Exchequer Department		Date of Written Report:	20th May 2019
Written Report Author:	Head of Financial Governance		Written Report : Public or Exempt?	Public
Subject: The allocation of up to £600,000 from Central Contingencies in 2019 to the Treasury and Exchequer Department for the costs associated with the PECRS Pre- 1987 Debt repayments.
Decision(s): The Minister approved the allocation of funds as described in the attached report.
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.38/2019) states: “This process replaces all other processes and applies to all elements of Contingency allocated in the MTFP excluding Pay, Pensions and Voluntary Redundancy.”
Resource Implications: The revenue head of expenditure for the Treasury and Exchequer department will increase by up to £600,000 in 2019 and Central Contingencies will decrease by an identical amount. This decision does not change the total amount of expenditure approved by the States for 2019 in the Medium Term Financial Plan Addition.
Action required: The Head of Financial Governance to notify the Director of Performance, Accounting and Reporting and the Finance Manager for Treasury and Exchequer once the decision has been approved.
Signature:		Position: Deputy Susie Pinel Minister for Treasury and Resources
Date Signed:		Date of Decision:

Central Contingencies transfer to Treasury and Exchequer Department: Public Employee Contributory Retirement Scheme - Pre 1987 Debt Repayments

Treasury and Exchequer

Ministerial Decision Report

The allocation of funds from central contingencies in 2019 to the treasury AND Exchequer Department – PECRS Pre-1987 Debt

Purpose of Report

To enable the Minister for Treasury and Resources to approve the allocation of up to £600,000 in 2019 from Central Contingencies to the Treasury and Exchequer Department for the costs associated with the PECRS Pre-1987 Debt repayments.

Background

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

The Pre-1987 Debt was created in 1987 as a result of changes to Jersey’s public sector pension arrangements. Prior to 1987 pension increases to public servant pensions were paid from revenue budgets. The Public Employees Contribution Retirement Scheme (PECRS) took on the liability for paying pension increases in respect of services prior to 1987. The increases could not be funded by the States and therefore a pension liability was created.

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. In 2015 the annual repayments were increased by a further £3 million per annum to bring forward the date of repayment. The framework for dealing with the Pre-1987 debt is outlined in the Public Employees (Pension Scheme) (Funding and Valuation) (Jersey) Regulations 2015. Under the regulations the debt, which was originally due to be paid by September 2083, are now due to be paid until September 2053.

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 2019 is currently £7,308,000 against the forecast of £7,891,600 and therefore the 2019 budget shortfall is £583,600. The estimated budget shortfall of £583,600 will be updated once the annual review by the Scheme Actuary has been undertaken in October 2019. The Department therefore requests approval to the allocation of funding up to the total amount available for the PECRS Pre-1987 debt repayments to the end of 2019 of £600,000.

Recommendation

The Treasury and Exchequer Minister is recommended to approve the allocation of up to £600,000 in 2019 from Central Contingencies to the Treasury and Exchequer Department for the budget shortfall 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.38/2019) states: “This process replaces all other processes and applies to all elements of Contingency allocated in the MTFP excluding Pay, Pensions and Voluntary Redundancy.”

5. Resource Implications

The revenue head of expenditure for the Treasury and Exchequer department will increase by up to £600,000 in 2019 and Central Contingencies will decrease by an identical amount. This decision does not change the total amount of expenditure approved by the States for 2019 in the Medium Term Financial Plan Addition.

Report author : Finance Manager - Treasury and Exchequer	Document date : 20th May 2019
Quality Assurance / Review: Head of Financial Governance	File name and path: L:\Treasury\Sections\Corporate Finance\Ministerial Decisions\DS, WR and SD\2019-0044 - Contingency funding to T&E for PECRS Pre- 1987 Debt
MD sponsor : Treasurer of the States