Pension suspension plans revealed

The Cayman Islands Government announced
details Friday of a voluntary temporary suspension of legal requirements for
pension payments made on behalf of private sector workers by their employers.

Precisely when the suspension would
take effect wasn’t clear.

Currently, Cayman’s National
Pensions Law requires private sector employees to pay five per cent of their salary
into a pension fund and also requires their employers to match those five-per-cent
contributions.

Under the proposed new legislation,
the five per cent payment requirement for all private sector companies would be
suspended temporarily.

For Caymanian employees, the
suspension could last up to 12-months. For non-Caymanian employees, the requirement
would be eliminated entirely under the amendments to the legislation put
forward Friday.

However, Employment Minister
Rolston Anglin said the government intended to amend that plan to allow up to a
24-month pension suspension for non-Caymanian employees.

The amendments to the law will have
no effect on government workers’ pensions.

“This measure is something that
government is doing to try to put people where they have more money in their
pockets…and should result in some general easing in our economy,” Mr. Anglin
said.

The pension suspension – or pension
holiday as it is called – will be voluntary.

“In the case of an employer-employee
relationship, both the employer and the employee must agree to the suspension
of the relevant pension contributions,” the amendment bill states. “They must
enter into an agreement that supersedes any contractual rights in their
employment agreement.”

There is nothing in the bill that
requires private sector employees to stop making the five-per-cent contribution
from their own salaries either.

Also, the bill stipulates that any
employers wishing to participate in the pension holiday must be current with
their pension payments, or participating in a payment plan to take care of any
arrears.

Mr. Anglin introduced the bill but
agreed to suspend further debate on it until Monday to give assembly members
more time to study the proposal.

The amendment regarding
non-Caymanian employees had not been made public. However, Mr. Anglin said the
proposal would allow for a 24-month pension contribution suspension, to be
reviewed at a later date.

Mr. Anglin said permanent resident
non-Caymanians and foreign workers designated key employees would fall under
the longer 24-month pension suspension option.

Key employees have the right to
work in the Cayman Islands for nine years – two years longer than most foreign
nationals – and to apply for permanent residence after they have been here
eight years.

It was expected that legislators
would pass all amendments to the law on Monday, following the debate. 

Mr. Anglin said he realised there
will be several concerns about the proposal, including the possibility that
suspending pensions for non-Caymanian workers would make it more attractive for
companies to hire foreigners.

The minister pointed out that
employers currently have to pay work permit fees for foreign workers – fees
that substantially increased recently – that they are not required to pay for
Caymanians.

“From that standpoint alone, a
Caymanian is cheaper,” he said.

The minister said he’s also heard
concerns from pension plan providers that dropping employee contributions for
any period of time would affect the amount of money the plans have to invest.
Put simply, less money invested means less overall earnings – particularly if
the markets are experiencing a period of rapid growth.

However, Mr. Anglin countered that
the needs of the present, in this case, probably outweigh the needs of the
future.

“A country does not save itself out
of recession,” he said. “We need to act.”

“None of us ought to believe that
we’re going to come out of this recession tomorrow.”

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