Markets take toll on Chamber pensions

Fluctuating world financial markets led to big losses for the Cayman Islands’ largest private sector pension fund in the period ended 30 June.

According to financial statements, the Cayman Islands Chamber of Commerce Pension Plan lost $23 million in net assets when comparing the period from 1 July, 2008 to 30 June, 2009 to the previous 12 months.

The operating loss for the fund during that period was about $47.5 million, compared to an $18.4 million loss recorded in the previous 12 months.

The largest investment losses for the Chamber fund came in the areas of equity investments and foreign currency holdings.

The Chamber pension fund, since 2006, has been split into certain investment groups that are based on when covered employees are expected to retire.

The plans are called the Chamber Lifecycle Plans 2015, 2025, 2035, and 2045 based on estimated retirement dates. There is also a Chamber income fund for those close to retirement or those who have already begun withdrawing cash from the fund.

The closer a plan member gets to retirement, the more conservative their investment portfolio becomes.

For instance, someone in the Chamber 2045 plan, who won’t be expected to retire for another 35 years, has 90 per cent of their portfolio invested in riskier equities and 10 per cent invested in fixed income options.

A member in the 2015 plan typically has 55 per cent equity investments and 45 per cent fixed income investments.

Equities, particular in the depressed US financial markets, have taken major hits over the period covered in the Chamber plan’s latest investment report.

All Chamber investment portfolios lost net asset value per unit for the 12 months between 1 July, 2008 and 30 June, 2009.

According to financial statements audited by PriceWaterhouseCoopers, the Chamber 2045 portfolio was the biggest loser at 36.54 per cent. The Chamber income plan (for those closest to retirement) lost 8.8 per cent net asset value per unit.

The audit report does not cover the investment period beyond 30 June, 2009.

The Chamber pension plan is not the only retirement savings proposal in the Cayman Islands to have taken a hit in difficult investment markets over the past year.

Earlier this month, Silver Thatch Pension plan reported an operating loss of US$28 million for the same 12 month period, 1 July, 2008 to 30 June, 2009.

The Silver Thatch plan also lost approximately $5 million in assets over that period.

The position of the government’s pension plan for civil servants for the previous financial year has not been reported. The defined benefit portion of the government’s pension scheme reported a significant unfunded liability in late 2006.

An actuarial evaluation of the Public Service Pensions Plan, completed in January 2008, has not been released.

In the current budget year, government has significantly reduced past service pension liability payments into the public pension fund as well. In the previous budget year, those payments were some $14 million. In the current spending plan, those payments have been reduced to $1.9 million.