UK - The Isle of Man has confirmed it will begin a three-month consultation next month over proposals to replace 15 of the island's 20 public sector pension plans with a new unified scheme.

The new scheme, developed by Hymans Robertson, would apply to all of the existing 7,500 public servants on the Island, except for the police, teachers and judiciary as their pay and benefits are determined by mainland UK regulations.

Under the current proposals the unified plan would have two parts - a common core and a voluntary supplement - with both sections open to all existing and new employees, and the core section will accrue benefits at a rate of 1/80th of pensionable salary.

It is expected the scheme would apply through transitional arrangements for existing workers, as well as new entrants, to avoid a two-tier workforce.

Although the basic staff contributions will be harmonised and the normal pension age will increase to 65, the Council of Ministers has claimed the scheme will offer more choice to employees over contributions and when they retire.

The Isle of Man government commissioned Hymans Robertson to develop an action plan for the "rationalisation and reform" of the public sector pension system in May 2008 as it revealed the public sector pension liability for past service was £1.1bn (€1.2bn) in 2006, with expected increases of £50m a year, yet the Public Sector Employees' Pensions Reserve only holds around £200m.

The government has warned without action the projected cost of public service pensions - on the existing pay-as-you-go (PAYG) basis - "will present significant additional financial challenges to our future generations, as the actual cost is currently rising at 10% per annum, from a current cost of £38m per annum".

The new scheme aims to be simpler to administer, affordable, sustainable and tailored to the Isle of Man requirements, and features include:

Choice of timing on retirement Ability to buy bigger benefits Lump sum payments of up to 30% of fund value Pensions guaranteed to age 75 Fair value conversion for past service Recognition of the special position of certain workers, such as mental health officers, prison officers, firefighters, GPs and dentists

However the Council of Ministers admitted that the issues raised in Hymans Robertson proposals are "not only complex but are of such sensitivity and importance" that no firm recommendations should be made to Tynwald [Parliament] until after a full consultation with staff and the representative bodies.

Tony Brown, chief minister of the Isle of Man will make an official statement regarding the consultation on the possible reforms at the January sitting of Tynwald next week, although it is expected the consultation will begin in early February and Ministers will report back to Tynwald in July.

The Isle of Man had an estimated population of 80,058 according to its last census in 2006 - the latest available information at the time of publication.

If you have any comments you would like to add to this or any other story, contact Nyree Stewart on + 44 (0)20 7261 4618 or email nyree.stewart@ipe.com