The States will decide later this month whether to back the above-inflation increase which has been proposed by
the Employment & Social Security Committee.
ESS wants to raise the old-age pension for a fully insured person to £292.09 a week from 5 January – an increase of 4.2% at a time when inflation has fallen below 4% and is soon expected to drop close to 3%.
The new rate would be in line with an uprating policy agreed by the States in 2015, and refined slightly since then, which links the old age pension to price changes in shops and earnings in the job market.
‘As the States pension is a contributory benefit funded from the Guernsey Insurance Fund, it was noted in the 2015 policy letter that ideally, from the beneficiary’s perspective, pensions should be uprated in line with increases in median earnings to maintain pensioners’ level of prosperity relative to median earnings at the same level as when the individual first reached pension age. However, from the perspective of financing the States pension and other contributory benefits, an uprating policy matching the increase in median earnings is very costly, as median earnings tend to increase over the longer term by more than inflation.
‘The one-third uprating policy represented a compromise position between these two interests, albeit slightly more in favour of the financial sustainability of the Guernsey Insurance Fund,’ said ESS in its policy letter, which has been lodged for debate by the States on 22 October.
The committee’s calculations for 2026 benefit rates have been complicated by an ongoing problem with the States’ rolling electronic census, which is outside its control and has left politicians reliant on outdated information about earnings, population figures, productivity and a range of other data.
It is also proposing the same increase of 4.2% to other benefits paid out of the Guernsey Insurance Fund.
They include allowances paid to widows and widowers, new parents, the unemployed, the sick and the incapacitated.
Unemployment, sickness and industrial injury benefit would be increased to £215.04 per week.
Maternity and newborn allowances would go up to £292.67 each week. The one-off bereavement payment would be raised to £2,654.
These rates are available to people who have a full social insurance contributions record. Reduced rates of benefit are paid to people with an incomplete record, down to threshold levels after which no benefits are payable.
ESS indicated that it may propose moving away from RPIX inflation as its primary measure when setting benefit rates in the future.
‘The committee notes that household cost indices were added to the suite of price inflation indices published for Guernsey from October 2022, and these indices provide greater understanding of how different types of household in Guernsey experience rates of price inflation,’ it said.
‘As some of these household types reflect, to some extent, groups of beneficiaries – for example, low-income households, households containing one or more children, and households containing one or more retired people – the committee intends to consider, as part of a wider policy prioritisation process, whether to undertake a review to determine the appropriateness of an uprating policy which is more sensitive than RPIX to the impact of price inflation on low-income households.’
Any proposed change would need to be approved by the States Assembly.