The States of Guernsey Committee for Employment and Social Security hosted a public presentation on Monday 16th December to provide an update to Guernsey employers on the current proposals for the introduction of Secondary Pensions.
Luke Bridle from Social Security presented on the latest developments and the significant updates were as follows:
- An administrator has been selected for the States facilitated “Your Island Pension” (YIP) and it will be Smart Pension Limited, a major United Kingdom (UK) headquartered auto-enrolment provider;
- Policy letter to be submitted to the States of Guernsey for debate and approval in early 2020, with a proposed implementation date of January 2022;
- Phased implementation, with largest employers first and smaller employers to follow up until smallest employers required to enrol employees by April 2024;
- Alternative ‘Qualifying Schemes’ can be used by employers, but they must be:
- Approved by the Revenue Service (section 150 or multi-member 157(A)).
- Regulated by the Guernsey Financial Services Commission (GFSC);
- Based in Guernsey, Jersey, the Isle of Man or the UK.
- Eligible employees will be any employee aged 16 and above earning above the lower earnings limit, unless they are in full time education or above States pension age;
- Contributions will be based on a % of salary and will be phased in over time, with initial year one contribution levels being a total of 2% (1% employer and 1% employee), but proposed to increase to a total of 10% in 8 years (3.5% employer and 6.5% employee);
- Employees can opt-out and if this is done within a short duration, both the employer and employee will receive a return of contributions paid;
- Employers cannot incentivise employee opt-outs;
- Re-enrolment required by employers every three years, besides for employees who have opted out within preceding twelve months;
- Individuals who are not eligible can choose to opt-in;
- The States of Guernsey will be financially supporting the YIP for an initial period, with total fees for the scheme intended to not exceed 1%;
- There will be no signup fees for the YIP;
- There will be a formal tender process during 2020 to select a locally based professional trustee for the YIP, to work with Smart Pension Limited to deliver the scheme;
- Self-employed and non-employed are not required to enrol, but able to opt-in;
- The YIP will include a default fund option selected by the trustees, plus a pre-set range of funds for individuals who wish to self-select;
- The YIP scheme will be able to provide income drawdown for those individuals who choose to take benefits in that manner, as opposed to purchasing an annuity and benefits will be consistent with what is permitted under the local tax rules and limits;
- The YIP scheme will be made available to residents of Alderney and Sark.
Smart Pension provided a demonstration of their platform from both an employer sign up and employee user perspective, however development work is required to make this fit for purpose for the YIP and Guernsey specific requirements.
It was stated that a UK based support team would be available to provide support to Guernsey based employers and employees, but a local Guernsey based office with 2-3 employees would also be setup.
Further updates would be made available following the States of Guernsey review of the pending policy letter, which is expected to be presented to the States in Q1 of 2020.
There is still a lot to be addressed, however Sovereign will be well placed to assist local employers who wish to establish a qualifying alternative scheme, with the ability to offer approved, regulated occupational pension plans and multi-member retirement annuity trust schemes.
If you would like further information or would like to discuss how Sovereign might be able to help, please contact Sean Gillease.