The new Government will at least consider the possibility of temporarily reducing or even suspending legally mandated pension contributions of private sector companies as a way to help businesses get through difficult economic times.
The proposal was recently suggested by Cayman Islands Society of Human Resource Professionals President Phil Jackson in an interview with the Caymanian Compass, and the new government administration seems willing to listen.
‘We need to do what we can to help businesses get through tough times, especially with an eye to those measures that don’t cost the government any money,’ said Rolston Anglin, minister with responsibility for national pensions. ‘At this point everything is on the table.’
What Mr. Jackson envisions is largely a voluntary measure; in other words, companies and employees could opt out of pension payments if they so choose for a limited period of time.
Right now, Cayman Islands law requires employees to contribute five per cent of their salaries into a pension or retirement savings plan and employers are required to match that five per cent contribution dollar-for-dollar out of their own pockets.
Mr. Jackson said government should consider offering the option of either temporarily reducing or even eliminating those payments to companies.
‘In light of the current environment, I think it would be good…a temporary reduction, from six to a maximum of nine months organisations would have the option of not paying pensions,’ Mr. Jackson said. ‘If employees still wanted to contribute, they would obviously be given the option as well.’
Mr. Jackson stressed that he did not support the elimination of pensions from Cayman Islands law, and only wanted to use the suspension of contributions as a temporary reprieve.
‘We’re not for doing away with the pension system,’ he said.
The change would likely require a temporary amendment to the National Pensions Law.
If the measure was made voluntary, as Mr. Jackson has suggested, it would also likely require some contractual arrangement between the employee and employer. Currently, pension plans are included as parts of working contracts for most Cayman Islands employees.
Mr. Jackson also said the suspension he wanted to be considered would only apply to the private sector.
Government employees’ pensions fall under a separate system where workers currently receive 10 per cent extra on top of their monthly salaries to go toward pension. They are not required to pay any of their own salaries toward the retirement system.
Mr. Anglin cautioned that it was too early to talk about even preliminary decisions on any plan to suspend pension payments, but that Government was determined to help small businesses in any practical way it can.
‘It’s better for us to do this than to have businesses close down and people go to social services because they don’t have a job,’ he said.
‘Having one less bill to pay will definitely help small businesses,’ Mr. Jackson said.
National Pensions Board Chairman Brian Bothwell said he hadn’t heard anything about the idea and was not prepared to comment on it.
Two other board members who spoke to the Caymanian Compass indicated such a plan was not likely to gain support from the board, at least not until more specifics about it were known.
In the longer term, Mr. Anglin said Government could also look at whether pensions should be paid to expatriate employees who have not been granted key employee status.
‘If they don’t have exempted (key employee) status, they have to leave in seven years,’ Mr. Anglin said.
He made similar comments during an economic forum held at the Westin Casuarina Resort in October.
‘We’re paying to support retirement systems in other countries,’ Mr. Anglin said during the October forum.
Mr. Jackson said he did not support that idea, and said all employees in the Cayman Islands should continue to contribute to pensions whether they are local or foreign nationals.
‘If you don’t, then you have a system of inequity,’ Mr. Jackson said. ‘You never know, an expat may get key employee status and end up staying here.’