The Island’s National Insurance Fund is heading for exhaustion sooner than previously projected, according to a report from the UK Government Actuary’s Department (GAD) to be laid before the May sitting of Tynwald.
 
The document shows the Fund peaking around 2036/37 then declining steeply to run out completely by 2054/55 – some five years earlier than indicated in the last GAD review based on the period 2002 to 2007.
 
Unless the NI system is changed, spending on the Retirement Pension is projected to increase by more than 500% over the next four decades, rising from ?55 million in 2011 to ?297 million by 2051. In addition spending on the Manx Pension Supplement is projected to increase from ?32 million to ?151 million over the same period.
 
State pensions account for around 65% of all expenditure from the NI Fund, with a further 19% spent on the Pension Supplement.
 
The latest 2007/12 GAD report explains that the Fund exhaustion date has been brought forward as a result of the introduction of triple guarantee pension increases and an overall decline in the number of contributors between the two reviews. However this has been offset to an extent by the effect of bringing forward increases in State Pension Age and a reduction in the uprating of certain benefits.
 
Commenting on the report, Treasury Minister Eddie Teare MHK said: ‘Although there is always an element of uncertainty with actuarial projections, the overall trend is clear. The National Insurance Fund will run out if the pensions and benefits system continues unchanged.
 
‘There is no reason for alarm over the latest GAD report, but it does underline the importance of planning ahead to protect the Fund for our children and grandchildren. That is why Government commissioned an in-depth review by specialist consultants of the options for the future, so that the Island can have an informed national debate on the way forward.’ 
 
The Minister added: ‘The impact of an ageing population on the long-term sustainability of the welfare system is a huge issue, but it is certainly not unique to the Isle of Man. Similar challenges are being faced by many developed countries around the world.’