Public sector workers will have to work until they are aged 70 to qualify for a full pension, employees heard in a presentation hosted by the Government.

The increase is one of three major changes to pension regulations that are expected to be tabled in the House of Assembly during this legislative session.

A 2 per cent increase in pension contributions over the next three years was also anticipated to be among the proposed amendments.

In a third change, the method used to calculate an individual’s pension will be revamped.

At present, a pension’s value is based on the salary of a retiree in their last year of employment. Under the change, it would be based on their average salary in the past ten years that they worked.

During a webinar with staff last Friday, David Burt, the Premier and Minister of Finance, said that the changes were necessary to keep the Public Service Superannuation Fund sustainable.

Mr Burt said: “Pensions are clearly a very important issue. The most important thing to note is that we’ve had, certainly over the last few years, multiple rounds of consultation with union leadership and rank and file and the objective of this is very simple.

“People are living longer, our pension system as it was set up is not able to be sustained and we must make sure that we make adjustments so that all public officers who have been working in the Public Service for a long time and those coming to the Public Service in the future will have a sustainable pension for their retirement.”

Barclay Simmons, a government consultant and chairman of the public funds investment committee, then gave a presentation before taking questions from attendees.

Mr Simmons emphasised that the revisions would be phased in gradually over the next decade in order not to hit workers with sudden changes.

He also noted that, because changes would be staggered over time, staff now approaching “the zone of retirement” would not be affected “in the first instance”.

The existing retirement age of 68 would increase to 69 in 2033. A second increase to 70 would be made in 2035. For special groups — the uniformed services of police, firefighters and prison officers — the increase would be made in six increments from 55 now to 60 in 2035.

Although employee contributions would rise from 8 per cent to 10 per cent in three stages under the plans, salary increases will mean that pay packets are not affected by the increase.

Uniformed services would see their contributions increase from 9.5 per cent to 11.5 per cent over the same time period.

The change in methodology in calculating a pension would also be phased in over the next ten years.

Mr Simmons said that he had held scores of meetings with union representatives and other stakeholders before coming up with the revision.

He said: “There was no scenario where people were minded to have a lower payout than what they had anticipated — that if they had to contribute more, if they had to work for longer, they wanted those options to be explored, but what they were not interested in was being paid less.

“And so what we did with those indications is that we incorporated that into the financial modelling and then we also incorporated that into the presentations that we put forward.

“We had a lot of work with Cabinet. The original proposal had the increases put in place immediately and Cabinet took the view that that was too onerous, that that was going to be too much of a burden on individuals, and so the change was made that it would be phased in over a three-year period.

“We did the modelling again to make sure that it would still be sustainable and we found that it would. It would take a little bit longer but we would be in the right direction.

“People who were in the zone of retirement, the intention is there will be no change for them in the first instance. The major changes would take place over time.”

Mr Simmons added that staff can still retire at 65 but their pension would be “slightly less” than someone who worked until they were 70.

On why reform was necessary, Mr Simmons explained: “The funds were set up with an expectation of a life span that has increased and continues to increase, so people are living longer.

“That is a good thing, that is not a problem. But if people are going to live longer, meaning they retire originally at 65 and in many cases live to 85 and beyond, that’s 20 years of pension payments that weren’t factored in when the funds were set up.”

As of March 2023, the PSSF faces significant unfunded liabilities, with net assets of $606 million against accrued benefit obligations of $1.63 billion.

Mr Simmons said: “The challenge that we have is that we’re not doing this in isolation and so the reforms that are proposed are to meet an ongoing decline in the assets as they exist.”

The team carried out an analysis of the investment performance and found “we were performing at or above the performance for funds our size”.

Mr Simmons said: “We cannot invest our way out of this problem. That is a level of risk that would be inappropriate. You would not want that and we would not do it. The change has to come from how the plan is set up.

“Without reform we will go from the funded status that we’re at today to a depletion of the funds in 2045.

“It doesn’t happen in 2045, it starts happening right away. We will be taking out more than we are paying in if we make no change.”

He added: “The option for doing nothing is that the assets decline. I’ve been very clear and I want to be clear today as well – doing nothing comes at a significant cost and undermines the promises of retirement for everybody else.”

The Royal Gazette put questions about the webinar and proposed changes to the Government yesterday.

In a statement last night, Mr Burt said: “Friday’s presentation allowed us to share with public officers a change to the proposals made following similar sessions in 2024.

“At that time, though public officers understood the need to make changes to ensure pensions are sustainable, concern was raised about the impact increased contributions would have on take-home pay.

“We confirmed to public officers that those concerns were recognised and factored into the historic pay agreement with unions.

“In addition to cost of living and historical pay adjustments, the Government is funding the increased employee contributions, so that public officers will not see their take-home pay reduced.”

A spokeswoman for the Ministry of Finance said a Bill to bring the changes into law was expected to be tabled in the House “during this legislative session”, and would take effect from October 1.