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Finance Minister Alex Allinson said he wanted a “full discussion” about the fund’s future.
Alternatives to the ‘triple lock’ state pension increase policy have been outlined in the Isle of Man National Insurance Fund’s sustainability report.
The £1.07 billion fund is topped up every year with what’s left over after contributions from workers have been used to pay for the bulk of benefits and the state pension.
However, the actuarial report for 2022 predicts that the surplus will decrease due to long-term claims for the national pension, and the fund will be depleted by 2047-48.
Finance Minister Alex Allinson said steps were needed to “secure the long-term future” of the fund and there should be a “national dialogue” about the situation.
Its “triple lock” principle is based on a formula that increases pensions each year by the highest of three options: 2.5%, CPI inflation, or average wage growth.
The report lays out four options for policy reform to create “alternative ways to increase pensions annually in line with inflation” by linking them to CPI and other factors.
In some of these models, pensions may not increase in years when the CPI is negative.
The changes will only affect people who reached state pension age on or after 5 April 2019.
“It’s not sustainable”
The report said the NI Fund’s four “policy principles” would be referenced when deciding on measures to withdraw money from the pot.
These included protecting the value of the Manx state pension, limiting surplus investment from the fund, and ensuring that all expenditure from the fund was covered by contributions to the fund.
The list also includes revisiting these principles every five years as part of the fund’s actuarial review.
Mr Allinson said in his 2023-24 Budget speech that the triple lock was “not sustainable in the long term without putting additional pressure on” payers to NI, saying it was unfair.
Commenting on the latest report, he said: “Over the coming months I will be working with members of Tynwald to develop a plan that will ensure the long-term sustainability of the current plan.”
A further report would be submitted before next year’s budget, he added.
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