St Peter Port Guernsey

I used to work on Guernsey and recently became a Director of a Guernsey company backing UK pension schemes. I remain a great affection for it and the other channel islands.

While I worked on the island, I became aware that while financial services is the island’s major industry, Guernsey has an underdeveloped pension system for those who live and work there.

As if pensions weren’t complex enough!

Part of the problem is that there is a very complex tax system covering Guernsey and its sister island Alderney. I remember sitting the Guernsey Financial Services exams and discovering (to my dismay) that I was being asked to sit a paper on Alderney life , pensions and taxation – I failed!

Keeping it simpler

So I’m  pleased to read that this complexity is easing and that in less than a year, Guernsey workers without a pension will be auto-enrolled into “Your Island Pension” (YIP).  YIP is a master trust , part of a  system to be officially known as “secondary pensions”.

The Guernsey authorities (the States of Guernsey) will have a default provider – equivalent to Nest. The default plan will be provided by Sovereign using a master trust. Details of the product are provided on Sovereign’s website, but they are sketchy. Employers will be able to use other authorised pensions as in the UK

Sovereign was selected by the Guernsey government to provide its new secondary pensions scheme following a tender process with local pension providers.

Auto enrolment

The Secondary Pensions regime is Guernsey’s equivalent of the UK’s auto-enrolment regime. The main aim is to support more working age people in Guernsey to save for their retirement, thereby enabling them to enjoy a more comfortable retirement and controlling welfare expenditure in the longer-term.

Details of the auto-enrolment process can be found here. Everyone working on the island will be  covered – from 16 to 75.

Under the secondary pension legislation, Guernsey employers will be required to contribute at least minimum levels into either the new secondary pension scheme, called YIP, or into a qualifying alternative scheme, following automatic enrolment of their employees.

It is to be implemented on a phased basis over a 15-month period, beginning with the largest employers (those with 26 or more employees). The minimum level of contributions will initially be 2% of earnings, with at least 1% paid by the employer. This will gradually rise to at least 10% of earnings with at least 3.5% paid by the employer after eight years.

Many of the features of UK auto-enrolment will be offered , including 3 month deferment, a lower earnings limit and re-enrolment all appear to be replicated from UK regulations. There will be fines (and even imprisonment) for those employers evading their duties and their doesn’t seem to be auto-enrolment for the self-employed.

The States of Guernsey has confirmed the formal date for Secondary Pensions introduction will be 1 July 2024, but Sovereign’s  YIP will be available from 1 January 2024 (for anyone looking to join a scheme early) .

I understand that the original starting date for secondary pensions was the beginning of 2023, the July 2024 date represents a further delay in implementation.

Sovereign’s Channel Isle MD , Sean Gillease, says

“Secondary Pensions will transform the way people save for their retirement in Guernsey, Sovereign is delighted to be playing such a central role in this transformation, delivering a solution that will be accessible for all Guernsey businesses – with ease of administration, online services and low cost being key to the service.”

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Residual complexity

I suspect that there will be residual complexity. Guernsey has a huge number of lawyers whose influence is all pervasive.

I had cause to reach for the glossary provided on the Secondary Pensions website. These were the first terms I encountered

https://gov.gg/secondary-pensions-glossary-key-terms

I look forward to finding out more about YIP in the coming months. In the mean time I suggest “approved” replaces “approbated” and actuaries have as little to do with regulation as possible!

Jersey

According to the Jersey Evening Post, The States of Jersey is considering its options