PUBLIC sector pension schemes are “in a very healthy financial position”, according to the retiring chairman of the committee that administers them.

Conscious of some of the criticism that has been levelled at the two schemes – the Public Employees’ Pension Fund and the Jersey Teachers’ Superannuation Fund – Gordon Pollock said that their assets, which total around £4 billion, were more than sufficient to cover their liabilities.

Mr Pollock, chief actuarial officer with Mercer until 2011 and a consultant with Barnett Waddingham until his retirement six years ago, said that the approach taken in Jersey differed markedly from that applied to the UK civil service and teachers’ pension schemes.

“Something that I think is not well understood is that the money [to pay the pensions] is actually there; it exists. If you want to talk about difficulties with public sector pensions and the funding of them, just have a look at the UK where there’s no fund. There, the schemes operate on a pay-as-you-go basis. Effectively, the contributions coming in from the current people are used to pay the pensions going out. There are no actual assets to back the promises that have been made to a lot of UK public employees. What is backing it is the promises that future generations of taxpayers will pay if there’s a shortfall,” he explained.

He contrasted this with the position in Jersey. According to the schemes’ reports, which are published annually, there was a very small negative cashflow last year with greater investment in assets to generate income but, effectively, assets exist to cover the liabilities as calculated by the actuary.

However, Mr Pollock pointed out that both Jersey statutory schemes – which together have round 20,000 members – had also been set up with what he described as a “safety valve”.

“The pension scheme says you’ll get a pension and the legislation says, subject to certain criteria, you’ll get increases of Jersey RPI. Last year there were very generous increases, for example. But the caveat is that if the actuary – through the three-year valuation – says the £4 billion is not sufficient to cover his estimation of the liabilities, he has to cut the benefits back, so you then don’t provide the full pension RPI increase. I would call it a conditional defined benefits scheme,” Mr Pollock said.

He added that this was not a theoretical provision and that for a three-year period, pensions were increased by a proportion of the annual RPI to take account of these calculations.