The move comes as a Brexit-induced increase in pension liabilities experienced across many businesses has also affected Guernsey Electricity. Bond yields have fallen in the wake of the UK’s vote to leave the EU while increases in the market value of pension assets have not kept pace.
Predicted rises in life expectancy have also continued to put pension schemes under pressure in general, with members aged 45 for example assumed to live for up to another 26 years if they attain retirement age at 65.
Amid Brexit and demographic pressures, Guernsey Electricity’s pension deficit has increased from £26.1m to £40.7m in the past financial year.
‘The Guernsey Electricity Board has continued to review pension arrangements because of concerns about the scheme future affordability,’ said Alan Bates, Guernsey Electricity’s chief executive officer.
‘We explored options to mitigate the risk of any unacceptable impact on the affordability of electricity prices, as well as assessing the balance between employee benefits against the cost to the business. We have continued to consult and discuss this with employee representatives on the joint negotiating committee.’
Mr Bates said the new Guernsey Electricity Flexible Pension Plan was launched for employees joining Guernsey Electricity from the start of October 2017 as a result of detailed analysis and consultation.
‘We have made this decision to better protect members of the current scheme, which otherwise would have become unaffordable. By acting now, we reduce the longer term risk while preserving the benefits of members accrued to date.
‘The flexible pension scheme for new starters allows them to choose manageable contributions and amend those as their own personal circumstances require. They will be offered a range of investment options,’ said Mr Bates.