The government will make no rash
decisions regarding a proposal that would allow Caymanians to take up to
$35,000 from their retirement savings accounts in a one-time withdrawal to
purchase a home or property, Education Minister Rolston Anglin said Wednesday.
The idea, floated in a private
member’s motion by government backbench MLA Ellio Solomon, is aimed at
encouraging home ownership. Mr. Solomon’s motion did not state that
non-Caymanians would also be able to withdrawn pension funds, but he has said
that would be considered.
Mr. Solomon said economic
conditions have created a “perfect storm” of lower property values, low
interest rates for qualifying borrowers and lower construction costs due to the
number of people looking for work on the Islands.
He said those conditions have also
made it more important than ever for Caymanians to be able to own a piece of
“The people of this country need
help, and they need it today,” Mr. Solomon said during debate on the motion.
Mr. Anglin, whose ministry has
responsibility for national pensions, said he intended to form a working group
to study the proposal with an eye toward creating reasonable legislation to
accomplish the intended outcomes.
“There is an issue with access to
capital for home ownership,” Mr. Anglin conceded, adding that government would
meet with stakeholders in the investment industry to explore options that would
“achieve the spirit of this motion”.
Opposition lawmakers had initially
balked at Mr. Solomon’s proposal, but Wednesday Opposition Leader Kurt Tibbetts
said he was comforted that the government had decided to take a deliberative approach.
Mr. Tibbetts also said that
comments made by Mr. Solomon and Bodden Town MLA Dwayne Seymour regarding the
importance of home ownership and its impact on family development in Cayman
were “spot on”.
However, the opposition leader
noted that the finer details of any pension withdrawal plan should be
considered carefully, especially as it related to the public service pensions
plan for civil servants.
Mr. Solomon’s motion contemplated
allowing both private sector and government employees to make the early
If some 1,000 civil servants wanted
to take advantage of the plan and withdraw up to $35,000 for a down payment on
a home or land, Mr. Tibbetts said such a take could mean a $35 million one-time
hit to the public service pensions plan.
“If that fund were robbed of $35
million within any period of time…that fund would be in dire straits,” Mr. Tibbetts
said. “(It) means you risk the ability to pay the pensioners.”
Part of what needs to be
considered, according to Mr. Anglin, are the current investment regulations
that dictate what Cayman Islands pension funds can put their money into and the
total contributions made each month to that fund.
“How confident are we…that the
average person is going to reach the end of their work life and have enough
money to survive independently of the government?” Mr. Anglin asked.
According to a 2006 consultant’s
report, Cayman should not be very confident about that.
The Mercer study noted that a
person making $60,000 per year on average over the course of their working life
would save less than half of the money needed to make it through 20 years of
retirement. That estimate assumed the current 10 per cent private sector
pension contribution rate was maintained.
Several pension plan providers
recently noted that if the pension-for-property swap was to be enacted by
government, Cayman would likely have to increase the required contribution
rates to those plans. One plan consultant said the contribution rate might need
to be increased to about 35 per cent of a person’s salary.
Mr. Solomon said it was obvious to
everyone that Cayman’s current pension schemes would not deliver retirement
security in any case.
“You’re falling short in terms of
what you are going to need to retire,” he said. “We have to do something to