January 23, 2022

The Editor Speaks: Are the changes to the Pensions Law good or bad?

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Colin Wilsonweb2The answer to that question is what side of the fence you are on.

If you read our story from Silver Thatch Pensions published May 30 2016 you will probably agree it is good for you.

“Increasing the retirement age from 60 to 65. This gives members more time to contribute and build their pension savings. It also means that employers must continue contributing for members who work to age 65.
“Increasing the maximum earnings for required member and employer contributions from CI$60,000 to CI$87,000.
“Requiring employers to start making pension contributions for work-permit employees earlier – at six months instead of nine months. Employers must continue contributing on behalf of Caymanian employees as soon as they start working.
“Curbing the ability to refund pension savings beyond a future date to be determined by Cabinet.
“The move to abolish refunds has been a key part of pension reform discussions over many years. The change is intended to reduce the possibility of pension members using up their pension benefits before retirement and then depending on the government for financial support. Once the new law is in effect, Cabinet will need to set a date after which pension plan members can no longer obtain a pension benefit cash refund.”

“The changes will also allow members to withdraw all or part of their additional voluntary contributions (AVCs) before retirement to address special financial needs, including:

“medical needs where health insurance is inadequate;
temporary unemployment of up to six months;
housing needs, including constructing or buying a house or paying a mortgage, but not for rent or similar purposes; and
any educational purposes.
“The government believes the ability to unlock AVCs will encourage members to boost their pension contributions. When your financial priorities change, your voluntary pension savings can be used to help meet your immediate needs.”

See iNews Cayman – https://www.ieyenews.com/wordpress/change-is-near-on-cayman-islands-national-pension-law/

What the article doesn’t say is this:

The proposed (Amendment) Bill 2016, is trying to change the age of retirement by giving it a new name (“Normal age of pension entitlement”) and calling it 65 years of age. What this means is that even if you wanted to start collecting your pension benefits at 60, you won’t be allowed. Even if your employer retires you at 60 (because they can), you will not be allowed to collect your benefits until you are 65. This is in no way for the benefit of employees in the islands, this is for the benefit of the pension plan providers/administrators so that they can hold on to your money for five more years and make money.

Five years’ worth of additional pension contributions at 10 percent is not going to increase your pension benefits significantly, but multiply that 10 percent by the number of members a pension provider has in their pension scheme over a five-year period and you can easily see who benefits from the increased age of retirement.

It would be more beneficial to an employee if they could retire at 60 and start collecting their pension benefits, continue working, instantly receive a 5 percent increase in their salary (because the 5 percent is not required to be deducted) and the employer saves an additional 5 percent (because they don’t have to match the contribution).

From Michael Caputo in Letter to Cayman Compass May 31 – see https://www.caymancompass.com/2016/05/31/stop-pension-law-changes/

Caputo has started an online petition “Stop three changes to the National Pension Law, Amendment Bill, Cayman Islands” at: https://www.change.org/p/arden-mclean-stop-three-changes-to-the-national-pension-law-amendment-bill

It does not affect me at all but I felt it was important for everyone to hear both sides of the fence. Which grass do you want to eat or perhaps pick from both sides what is the juicier?

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