THERE might be celebrations going on at the Social Security Department this week but do not be surprised if you catch the Minister, Senator Elaine Millar in reflective – rather than exuberantly party – mood.
Seventy-five years ago this month, the social security fund that pays old age pensions and other working benefits was established by the late Senator Philip Le Feuvre. One of Jersey’s great politicians of the past, he was until recently remembered in the name of Social Security’s old headquarters in La Motte Street.
Life today would be “inconceivable” without the fund he established, Senator Millar believes. And she can point to some arresting statistics to prove it. Today more than 33,000 people receive a Jersey old-age pension with payments totalling more than a quarter of a billion pounds each year, while the fund itself holds more than £2.5 billion in reserves.
You would surely imagine that back in 1951 Islanders were running up the flags and popping the champagne corks to celebrate the great man’s achievement. After all, Senator Le Feuvre – who had promised the introduction of social security when he became Jersey’s first poll-topping Senator – was faithfully delivering on his pre-election pledges. Not a bit of it. And that is just what makes the current minister pause for thought.
“There were protests in the Royal Square – quite significant protests, particularly from the farming community who thought it was going to kill their business forever. There was also a petition, predating the days of electronic petitions and signing-up online, with over 12,000 signatures opposing social security on the basis that it was going to infringe individual liberty, make the cost of living higher and not be in the interests of the Island. So people were very, very sceptical about it and quite frankly opposed,” Senator Millar said.
Senator Le Feuvre’s struggle prompts a further thought: had the government of the day given in to the pressure of a minority – albeit a sizeable one – the Island would today be in a very different position. “It’s just interesting to reflect that it had a very difficult genesis by the sound of it,” she added.
Senator Millar is thinking about that genesis because she also foresees a challenge as she seeks to establish workplace pensions, a top priority for her latest term as Minister. You sense her caution when she winces at the use of the word “compulsory” in connection with those pensions; she prefers “secondary”, she explains with a smile.
As if to reinforce that caution, the Chamber of Commerce has already expressed its reservations about the impact of any mandatory contributions on employers. Senator Millar acknowledged that the proposal “would probably be controversial in the way the social security scheme was”.
“It will not be plain sailing, I’m quite well aware that it will not be plain sailing but I think it is important that we make it as easy as we can for people to save extra sources of income for when they retire,” she said.
Her case for government intervention is founded on an acknowledgement that the state pension was not intended to replicate a working wage. It was also introduced when life expectancy was far lower than it is today. Although income support exists by way of a safety net, Islanders should be encouraged to be financially independent in their later years, and private pensions do not necessarily work efficiently for those on lower wages, the Minister believes.
She continued: “The important thing for us, I think, is that we try to structure something that really works well for Jersey. It reflects that we’re a relatively small community and that for the scheme’s pot to achieve critical mass, we really need as many people as possible to be in it. We need employers to be contributing.”
Of course, Senator Millar’s predecessor at Social Security Deputy Lyndsay Feltham took a rather different approach. She preferred to address the more immediate challenge of wages and their relationship with the cost of living, rather than looking ahead to retirement savings. So how much modelling has been done to balance the long-term benefits of secondary pensions with their immediate impact, not only on employers but also employees? They would have to make provision for contributions from their earnings.
“I think the modelling at this stage is really simply about the principle of having another source of income when you retire. We are a long way away from setting what the levels are. We wouldn’t go straightaway and say to employers, we want you to pay 8% into a pension scheme, and we want employees to pay 5% because everybody would throw their hands up in horror and be aghast, saying we can’t possibly afford that.
“So we would have to bring it in in a very small way. Clearly, there are implications for cost of living and implications for employers, but I would think that how it may work in the early days is say we start with a very small contribution of 1% each. The employer may say, well, I’m going to pay 1% pension contribution, but I would have given you, say, a 4% pay rise, so I will give you a 3% pay rise, and put the 1% in,” she explained.
Senator Millar has also heard the familiar argument from those who believe that buying a house that will effectively become their pension is better than paying into a pension scheme.
She has a ready response: “That house is only a pension if you’re willing to sell it, and release the capital. I think often people get older and they don’t want to sell their house, [and] there’s all kinds of reasons why they don’t want to move. The house has to generate enough money for you to buy an alternative place to live, plus generate a pot of money that you can then draw on as your pension, and that’s the thing I think is often overlooked with the ‘house is the pension argument’”.
Having already encountered some reservations among previous ministerial colleagues, the Senator is realistic about the time it might take to introduce secondary pensions. She aims to have legislation in place during the current government’s term of office but concedes that the mechanics of employers’ payroll may need more time to address.
“There is a lot to do, but I do believe it would be a real legacy project. If we can get in a further pension scheme to promote financial independence, it would be very valuable in decades to come,” she added.
Secondary pensions are not the only thing on the Minister’s agenda. She is also working to iron out what she calls “the odd wrinkle” in current pension rules. She gives the examples of those who have paid their full contributions and have not retired but are still paying further contributions, and those who want to move from being an employee to being self-employed.
“It’s important that we look at that because we do have rising numbers of entrepreneurs, people wanting to work for themselves,” she said.
With much to do, the recent controversy over her colleague Deputy Gerald Voisin’s comments on the minimum wage might be considered a distraction. But the Minister wants to highlight something else: not the principle of the minimum wage but the process by which its level is fixed.
She points our that the last States Assembly authorised the Minister to set its level, effectively bypassing the statutory route of consultation through the Employment Forum.
“That has led to very significant increases with a view to reaching two-thirds median which I think it does now do. So we are, from my perspective, back in the statutory process where we’ve gone to the Employment Forum. The previous Minister has already instructed them to carry out a consultation and report and make a recommendation. That’s the statutory process,” she said, adding that the recommendation was expected later this month (September).
So far as relationships around the ministerial table in the wake of the controversy, Senator Millar said that they are “all moving forward” as they prepare for the release of the Common Strategic Policy. “We are all friends around the Council of Ministers’ table,” she added. But she gave a clue to the policy’s content.
“I think it’s very clear that a significant focus for this government will be economic growth, and if we get economic growth and businesses are doing well, that will lead to better wages and better work packages for staff. I expect the Council of Ministers will want to balance increasing the minimum wage with economic growth and not hampering [that] growth, she said.
While that work is in train, discussions are also proceeding with the Health Department over the transfer of the Health Insurance Fund, something flagged by Health Minister Senator Tom Binet over the summer. It means that funds used to subsidise visits to doctors and free medicines would pass to the responsible minister.
But although some long term care has been provided by the Health Department, care funding generally comes from the long-term care fund, demand for which is increasing. Senator Millar warns that as costs rise the sustainability of the fund into which Islanders pay with a separate line on their tax forms will have to be looked at.
“We’ve done a big piece of work to look at the options for long-term care. And the options are effectively [that] you put more money in, or you reduce the benefit. Now, reducing the benefit may not be the right thing to do in the long term because of people then not getting care: they deteriorate faster. It’s not in anybody’s interest to be denied the care they need.
“Or you do something: you look at the provision of care, and you look at automation and technology, and how the care sector’s working. That will take some time. There’s no easy answer to that,” Senator Millar said, adding that she could not comment on the issue of increasing contributions ahead of the forthcoming budget.
As the 75th anniversary of Philip Le Feuvre’s ground-breaking social security fund arrives, a review commissioned by the previous Minister is being considered by the Department.
What form will such evolution take? What impact will it have on wider economic conditions and on the cost of living? What will the approach be to the States grant which is added to contributions paid by Islanders? These are questions that the Department will consider in the coming months.
But for Senator Millar there is a fundamental principle that remains unchanged.
“With social security it really is long term – we have to look to the future and what we want it to be. I still think that if you are paying social security contributions you should be able to have an expectation that you will have a pension at the end of the day and all the benefits,” she said.
