The latest UK Government Actuary’s Department’s report on the social security and health insurance funds has found that they are in ‘good health’ but it is likely contribution rates, which are currently 10.5%, will need to increase gradually over the next 20 years to keep them replenished. It adds that social security expenditure is likely to rise in the coming decades because the average age in the Island is increasing and high levels of immigration will be needed to support the ageing population.
‘The number of people of working age for each person over pension age, excluding overseas pensioners, is projected to reduce from just under four in 2017 to about 2.8 around halfway through the projection period (the 2030 and 2040s) on the net inward migration assumption of 700 people each year,’ it says.
‘The extent of this ageing of the profile, and its impact on the break-even contribution rate, are very dependent on the assumed level of migration.’
The report adds that early, but not immediate, action should be taken to adjust social security contributions as necessary.
‘Given the long-term nature of the commitments built up in social security schemes, it is important to take early action to stabilise the future financial position of the fund,’ it says.
‘However, the fund balance is projected to remain well above zero in the short to medium term, and therefore it is not essential to take immediate action over the finances of the fund.’
Under the different scenarios outlined by the report, the social security contribution rate would need to raise to a peak of 12.3% by 2037 if net immigration is 1,000 people per year.
If immigration is limited to 325 people per year it is anticipated that the rate could reach 14.5%.
Social Security Minister Judy Martin said the funds supported the strategic priority of reducing income inequality in Jersey.
She added: ‘The actuary’s reviews will support the policies we develop to help deliver these priorities over the next four years.’
