THE stock market crash may have wiped more than £200m off the value of the States employee pension fund.
The fund stood at £1.1bn at the start of the year, but has been hit by the 32% plunge in the stock market since January. With an estimated 60% of the total value of the fund tied up in equities, the damage is estimated at anything up to £216m.
The fund was already carrying a £145m deficit, according to the 2007 States Report and Accounts. Those accounts also suggest that the amount of cash held under the scheme went down between the end of 2006 and the end of 2007 from £225m to £9m – while the amount of equities went up a similar amount, increasing the risk from falling share prices.
The Public Employee Contributory Retirement Scheme (PECRS) fund is a final salary scheme for States employees. The scheme is not guaranteed by the States – shortfalls have to be made up by reduced pensions or increased contributions from members, ie States workers. A committee of representatives from the States and employees’ sides manage the scheme, advised by professionals.
A statement from that committee is expected soon, and Treasury Minister Terry Le Sueur has declined to comment on the state of the pension fund.
Article posted on 18th November, 2008 - 2.58pm
6 Article Comments
Well as Terry Le Sueur claims “the recession will pass Jersey by” so this obviously didn’t happen and if it did it apparently therefore doesn’t matter.
Apparently however a lone ostrich has also been spotted on St Ouens bay with a metal detector looking for lost change left by another endangered species “tourist usedto visitus…”
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Someone informed me that unfortunately for the employees they can not pull out of the pension as it is compulsory so if the States lose the lot then its the employees that suffer. Ok some people will say it is a good pension, and it is. But if you were forced to pay 5% of your wages and you see it drifting away on crap investments i to would be worried. Guernsey is all ready thinking about adopting the UK by increasing the pension age to 67 or even 70 and Jersey will follow soon. If the States keep losing public money like £200 million pounds then they should give their Staff the option of investing the 5% elsewhere.
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Before I left working for the States I had my pension frozen and when I talked to the people at C.L. Marquarand House about shortfalls, black holes they replied that “each year my fund was locked in, and that once locked that was that”. Because I have based all my calculations on those statements and I was there 2/3 times to hear the same from different staff, it’s a bit disquieting to hear the words “reduced pension”. I await my January report.
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Yes Phil, an amazing realization has hit Jersey; ‘We live in the real world’.
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Fact is this £200m loss is only and issue if the fund crystallises and becomes realised… which it won’t! The funds are invested for the long term and will pick up again when markets recover.
People currently receiving pensions are paid by those contributing so the investments have sod all to do with current payments and pensioners won’t be affected. Do some research before spreading your doom and gloom.
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The States Scheme increased its exposure to shares when it exchanged the guarantees on benefits for the guarantees on funding a couple of years ago. Without the need to guarantee anything, the Scheme could go all out for growth, it’s had a couple of good years (which I don’t see any comments on) and now its having a bad year. The assumption is that shares will do better than cash or other investments over the longer term. Your best course is to sit tight till the turbulence is over. Interesting to see what the States policy is if the fund does run out of money to meet its obligations- will those receiving pensions be prioritised or will both future pensioners and those in payment lose out. There’s a puzzler.
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