Social security: Higher earners to pay more?

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Currently a cap on social security contributions is in place, which means that employees do not make any payments on earnings of more than £51,480 per year – a move which has attracted criticism for being a ‘regressive tax’ system which impacts more on people with low incomes than higher earners.

Political party Reform Jersey has been a long-time critic of the system and pledged to raise the contribution cap for high earners as part of its manifesto for this year’s General Election.

Yesterday, in her first Scrutiny hearing as Treasury Minister, Deputy Susie Pinel was asked by Corporate Services Scrutiny Panel member Deputy Steve Ahier whether there were any plans to raise or remove the contributions cap.

Deputy Pinel confirmed that this was being considered and reviewed by officers in the Social Security Department who have been carrying out a comprehensive review of the Island’s welfare mechanisms over the last three years.

She added that extra money would be needed to fund social security, as the average age of Jersey’s population will rise over the next two decades, increasing the cost of health care, welfare and pensions.

‘There’s a social security review going on as we speak and the results are coming out in September,’ she said.

‘It’s a three-year review of different areas. Contributions are in this year’s review and that is one of the considerations – whether to raise the cap or remove it altogether.

‘There will certainly have to be changes because we have an ageing demographic. We will have double the number of pensioners by 2035 and the Social Security Fund has to be sustainable for that reason.

‘[To find out] if it is through contributions increasing or the caps being removed, we will have to see what the results of the review are.’

Under the present system, employees in Jersey pay six per cent Social Security up to a monthly earnings cap of £4,290, which equals an annual salary of £51,480.

Employers pay 6.5 per cent up to the same level and pay a further two per cent on earnings between £4,290 and £14,188 per month.

The public hearing of the Corporate Services Scrutiny Panel was also attended by chairwoman Senator Kristina Moore as well as panel members Deputy Jess Perchard and Constables Richard Vibert and Karen Shenton-Stone.

The Treasury Minister was supported in the meeting by her assistant minister, Deputy Lindsay Ash, and the States Treasurer, Richard Bell.

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