Personal Pension  

Isle of Man to increase state pension age to 74

A review of the Isle of Man’s social security regime has proposed increasing state pension age to 74 for anyone born after 2011 to ensure the national insurance fund, from which state pension is paid, does not run out of money.

A 643-page document reviewing the Isle of Man’s social security and national insurance schemes has revealed the government’s key proposals to review the state pension age.

Its preferred option is to increase state pension age to maintain pension support ratios at a “sustainable level”, which implies basing retirement age until 2072 on the principle of retirement lasting 30 per cent of working life.

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The paper said this option will “ensure fairness in terms of the financial strain placed on the working age population to support pensioners”.

The other six recommended reforms are to:

• introduce a flat rate single-tier pension system from 2016, with £180 being the maximum rate payable;

• extend the contributions required to qualify for a full state pension to 45 years;

• phase out the pension supplement over 2 years for new entrants;

• up rate the state pension in line with growth of Isle of Man average earnings;

• workers aged over state pension age are liable for employees’ national insurance contributions; and

• reduce the rate of employer’ NICs to be in line with that for employee NICs.

The paper said that if all seven of the reforms are implemented, the NI fund will be sustained through to 2072.

Tom McPhail, head of pensions research at Hargreaves Lansdown said: “We’re not quite in such radical territory yet, here in the United Kingdom and there are important differences between The IOM and the UK.

“In terms of demographics and the support ratio of workers to retired population, the challenge in the IOM is more severe than in the rest of the UK.

“Nevertheless there are also some close parallels and the scale of radical reform called for by this review in the IOM points to the kind of shift in state pension provision that we should expect over here in the longer term.”

Additional reporting by Donia O’Loughlin