Pensions, benefits and the funds that pay for them.

The Budget brings the two funds into the Core Government position as one line, a £13.2m deficit for 2027. The line hides two opposite stories. The Insurance Fund loses £22.9m; the care fund makes £9.6m, and the care fund’s surplus is falling.

The 2026 forecast is £15.7m better than the 2026 original budget for the two funds together. Contribution income is forecast at £252.3m against a budget of £232.1m, a difference of £20.2m. Paragraph 4.39 of the Budget attributes the improvement to additional receipts after a change in how owner-controlled limited liability companies are classified, which it says “has had a greater impact than initially expected”. A reclassification changes who pays into the system. It does nothing to the growth in pension spending.

The Budget also shows £38.6m of social security contributions as General Revenue income for 2027, up 11.9% on the 2026 budget. It puts the rise down to the 0.2 point rate increase and compliance work (paragraph 4.7). The ESS contribution tables show a separate Health Service allocation alongside the two funds.

The operating deficit has not widened since 2021. It was £29.1m in 2021 and is budgeted at £22.9m for 2027. Contribution income grew 24.8% between 2021 and 2024, while spending grew 19.3%. The ten-year plan the States approved in October 2021 added 0.3 points a year to the combined Class 1 rate from 2022 to 2025 (0.2 of them for the Insurance Fund, 0.1 for long-term care) and 0.2 points in 2026. Each annual step of 0.1 points for employers and for employees raises about £5.4m a year.

The reserve is the weaker figure. Net assets sit between £717m and £764m across the six years, because investment returns have roughly matched the deficit. Spending has grown, so the same reserve buys less. Cover has fallen from 4.4 years to 3.4 years in the 2026 budget. Peter Roffey, writing in the Guernsey Press on 28 July 2026, calls the fund “essentially unfunded”: today’s contributors pay today’s pensioners, with a modest buffer that keeps General Revenue out of it.

The September 2025 policy letter forecast a £34.2m deficit for 2025. The Budget 2027 report records an outturn of £22.2m. The forecast missed by £12.0m, all of it on the income side.

What the last actuarial review projected

The Government Actuary’s Department reviewed both funds for the period 1 January 2015 to 31 December 2019. At then-current rates it projected that the Guernsey Insurance Fund would be exhausted by 2039 and the Long-term Care Insurance Fund by 2053. That review also projected a 74% rise in pension spending between 2025 and 2040, to about £296m a year. The contribution increases since 2022 were designed to move the exhaustion date back, and the projection section below tests how far they do.

Committee for Employment & Social Security, "Contributory Benefit and Contribution Rates for 2026", P.2025/113 (policy letter dated 8 September 2025); Bailiwick Express, "Pensions bill nearly double over next 15 years" (18 December 2024). The 74% and £296m figures are as reported by the Bailiwick Express, which cites the ESS; the review itself is not published online in full.

Sickness, incapacity, unemployment and industrial injury benefits together cost £16.9m in 2021 and are budgeted at £23.0m for 2026, a rise of 36%. Unemployment benefit shows the largest percentage rise at 70%, but from £1.0m to £1.7m, so it moves the total by less than a million pounds. Sickness benefit has risen 38.3% and incapacity benefit 32%. The Work & Wellbeing Strategy, launched in May 2025, aims to stop sickness claims turning into long-term ones. The States have published no count of long-term claimants, so this page cannot say whether it is working.

Weekly rates of contributory benefits, 2025 and 2026, £

Committee for Employment & Social Security, "Contributory Benefit and Contribution Rates for 2026", P.2025/113 (policy letter dated 8 September 2025); States of Guernsey, "Benefit Payment & Contribution Rates for 2026" leaflet no. 50. Reduced rates are paid on incomplete contribution records. The dependant increase applies only to people who reached pension age before 2014 and married before 2004.

Two decisions in February 2025 pull in opposite directions. The States raised care home bed rates to the mid-point of a LaingBuisson cost analysis, to stabilise the private care home market and encourage growth in beds. They also agreed to move the whole cost of accommodation and living onto the resident over five years, so the co-payment climbs from £342.02 to £514 a week in 2025 terms by January 2030. A residency test of 20 years’ aggregate adult residence and a user care cost contribution of up to £10,000 (not before January 2027) came in the same package.

Benefit spending on care was £25.6m in 2024. The Budget puts it at £36.8m for 2027, up 44%. The surplus before investment returns fell from £15.1m in 2024 to a budgeted £9.6m in 2027. Net assets of £212m give 6.4 years of cover, well above the pensions fund. The Budget (paragraph 4.40) says the fund “also faces long-term funding pressures” and that about £7m a year of extra income was estimated at the time of the Tax Reform letter.

When would the care surplus run out? A Bridgehead sensitivity

Starting point: the 2027 surplus of £9.6m on £36.8m of benefits, with administration held at £0.5m. For scale, spending grew about 10% a year from 2022 to the 2026 budget, much of it from the February 2025 rate rise, a one-off step. The surplus moving to a deficit does not exhaust the fund, which holds £212m. Bridgehead projection, not a States of Guernsey forecast. The States have not published a revised actuarial projection, and when they do it replaces this one.

Total claims were almost unchanged (3,181 to 3,204), but the mix moved. Jobseeker claims rose 24%, from 242 to 299. Pensioner claims fell from 914 to 897 and single-parent claims from 330 to 285. About 20% of claimants rent privately, where rents typically exceed the maximum rent allowance.

General Revenue spending on the non-contributory benefits, £m

For 2027 the Budget gives Employment & Social Security a formula-led budget of £86.1m under Option A, up 3.3% on the 2026 authorised budget, and £88.3m under Option B, up 6%. The 2026 forecast shows family allowance underspending because fewer claims arrived than budgeted, and severe disability benefit and carer’s allowance overspending because more did.

Weekly rates, 2025 and 2026, £

Committee for Employment & Social Security, "Non-contributory Benefit Rates for 2026", P.2025/123 (policy letter dated 7 October 2025); States of Guernsey Budget 2027 (full report), Committee for Employment & Social Security pages 116 and 117 and Contributory Funds page 143, paragraphs 4.28 and 4.39 to 4.41. Most rates rose 3.7% (RPIX to June 2025); winter fuel allowance rose 4.3%. For poverty measures and the effect of benefits on household incomes, see Living Standards.

What changes from 2028

• A social security allowance of £11,122 for employed and self-employed people, matching the one non-employed people already have. It is withdrawn at £1 for every £5 of income above £85,000.
• Employee rate 8.5% (from 7.5% in 2026); self-employed 14.5%; non-employed under pension age 8.5%, a cut; non-employed over pension age 4%, a rise from 3.8%.
• Employer rate rising from 7.1% to 7.6% in steps from 2027 to 2029, with no allowance. A further 2.5% on earnings between the upper earnings limit and £300,000, paid by employers and the self-employed.
• A pre-emptive rise in the States pension and other benefits ahead of the 3% GST, which the policy letter expects to add 1.9% to RPIX. On the 2026 benefit bill of £212.6m, 1.9% is about £4.0m a year. That is Bridgehead arithmetic, and the Committee will set the actual uprating each year.

Policy & Resources Committee, "Tax Reform 2026", P.2026/49 (policy letter dated 8 June 2026), Appendix 7 and executive summary; States of Guernsey, "Social security contributions changes"; States of Deliberation voting record, Tax Reform 2026 Proposition 1 as amended (carried 22 to 17, 2 October 2026). The allowance is expected to rise towards the income tax personal allowance if revenue permits. The final limits will be uprated before 2028.

The package against the funds’ stated needs

The restructure raises a net £2m a year from contributions. Paragraph 4.40 of the Budget refers to a £19m estimate for the Guernsey Insurance Fund, taken from the Tax Reform policy letter and based on a long-term review of the fund. The same paragraph says the care fund needed about £7m of additional annual income when the letter was drafted. Together that is £26m a year, against a net £2m from the contribution changes.

These are different kinds of number. The package was designed to redistribute contributions, and the January policy letter described the result as raising a similar amount to the 2025 forecast. The funding requirement is an estimate of what the funds need, and the Budget says updated actuarial reviews are under way to firm it up. The fair reading is that the approved package changes who pays and leaves most of the funds’ long-term gap for a later decision. The projection below shows what that decision is worth.

The three decisions, at three speeds of spending growth

And if investments return less than the 4.6% assumed

What the model says

• On central assumptions the fund does not run out before 2045 under any of the three decisions. With rates held at their 2027 level, though, the deficit grows from £22.9m to £70.5m in 2040 and £99.3m in 2045, and the fund is down to 0.6 years of spending by 2045. At that point it is close to a pay-as-you-go scheme.
• Finishing the ten-year plan (four more 0.2 point steps, 2028 to 2031) lifts 2040 net assets from £618m to £1,026m and halves the 2040 deficit to £37.8m. The approved package’s own contribution changes net to £2m a year across all the funds, and the model leaves them out.
• The fund’s fate depends on two numbers the States do not control: how fast pension spending grows and what the investments earn. At 5% spending growth, rates held run the fund out in 2042. At a zero return the same happens in 2042.
• The 2020 actuarial review projected exhaustion by 2039. This model reaches a later date for a reason that is visible in the history above: the contribution rises since 2022 and a better 2025 outturn have held the operating deficit near £29.1m for six years instead of letting it grow.

Assumptions, in full

Starting point

Budget 2027 fund table: social insurance benefits £230.8m, plus £6.3m of administration (total administration less £0.5m for the care fund), gives £237.0m of spending. The £22.9m deficit implies £214.2m of income.

Spending growth, after 2027

3.8% central, which is the 74% rise over 15 years in the last actuarial review expressed per year. 3.0% low (prices only, no ageing effect). 5.0% high (a repeat of part of the 2022 and 2023 inflation spike).

Income growth

3% a year, from earnings growth on a flat or shrinking workforce (the States’ central population scenario peaks near 2027).

Investment return

4.6% a year, the trailing ten-year return to June 2025. The Investment Board’s target is UK CPI plus 5%, which the portfolio has not met. Returns are applied to the opening balance, before that year’s deficit.

Ten-year plan

Four further steps of 0.2 points in 2028 to 2031. Each step adds £5.4m in 2026 terms (the ESS estimate for the 2026 step), grown with income. 2027’s step is already in the Budget.

Plus £19m

A fixed £19m a year from 2029, the Budget’s estimate of the Insurance Fund’s requirement, with no growth.

Left out

The approved tax reform’s contribution changes, which net to +£2m a year across all funds and are not split by fund. The 1.9% pre-emptive benefit rise ahead of GST (about £4.0m a year at 2026 spending). Any change to the pension age schedule, migration, or the share of contribution income that goes to the Health Service allocation. Each would move the result, and the first two would move it in opposite directions.

Bridgehead projection, not a States of Guernsey forecast. The States have not published a revised actuarial projection, and when they do it replaces this one.

• The revised actuarial reviews. The Budget (4.28) says one is under way for both funds. Until it is published there is no official trajectory after the 2020 review, and every projection here, including the States’ own £19m and £7m estimates, is provisional.
• Long-term sickness and incapacity claims. The States publish spending, not the number of people on each benefit, so the page cannot show whether long-term claims are rising.
• Unemployment. The Economy page carries the jobseeker count; the figures there stop at September 2024.
• The employer rate steps. The package says 7.6% is reached between 2027 and 2029 but the year-by-year steps are not in the documents reviewed.
• Care benefit for people at home. A homecare benefit and a complex care rate were agreed in principle in 2020. The ESS reports that work has stalled while a new model of community care is developed, so the cost is not in any projection.

Every figure comes from a States of Guernsey policy letter, the Budget 2027 report or the voting record, except where a section is labelled as a Bridgehead projection or as Bridgehead arithmetic. The 2021 to 2026 fund series use the latest ESS policy letter that reports each year. The Budget 2027 report is a later document and reports 2025 actuals, so the page shows it as a separate series rather than splicing the two. Where they overlap, benefit spending agrees to within £1m, which a test in the code checks, and the funds’ income and deficit differ because the 2026 forecast moved.

Every table on the page reconciles in a test: operating results equal income less expenditure, net assets roll forward from the opening balance, years of cover equal assets over spending, and benefit lines add to the Fund’s expenditure.

• Committee for Employment & Social Security, "Contributory Benefit and Contribution Rates for 2026", P.2025/113 (policy letter dated 8 September 2025)
• Committee for Employment & Social Security, "Contributory Benefit and Contribution Rates for 2025", P.2024/78
• Committee for Employment & Social Security, "Non-contributory Benefit Rates for 2026", P.2025/123 (policy letter dated 7 October 2025)
• States of Guernsey Budget 2027 (full report), Committee for Employment & Social Security pages 116 and 117 and Contributory Funds page 143, paragraphs 4.28 and 4.39 to 4.41
• Policy & Resources Committee, "Tax Reform 2026", P.2026/49 (policy letter dated 8 June 2026), Appendix 7 and executive summary
• States of Deliberation voting record, Tax Reform 2026 Proposition 1 as amended (carried 22 to 17, 2 October 2026)
• States of Guernsey, "Social security contributions changes"
• States of Guernsey, "Benefit Payment & Contribution Rates for 2026" leaflet no. 50
• Policy & Resources Committee, "Tax Reform: Workstream 1", P.2026/7 (policy letter dated 12 January 2026), paragraph 3.9
• Bailiwick Express, "Pensions bill nearly double over next 15 years" (18 December 2024)
• Guernsey Press, Peter Roffey, "Guernsey pension fund reserves sharply decline" (28 July 2026)
• States of Guernsey Data & Analysis, Guernsey Quarterly Population, Employment and Earnings Bulletin (29 October 2024), Table 2.2.1

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