Pension reports deferred, not done

The Cayman Islands Public Service Pensions Board did not complete an accelerated evaluation of its investment funds as recommended in January, 2010, according to information obtained through a Freedom of Information request made by the Caymanian Compass.

In addition, the board has again deferred the release of a January 2008 funds evaluation, which was completed in March 2009.

“The 2008 actuarial report of the Public Service Pensions Fund is not available as it is waiting to be tabled in the Legislative Assembly,” the board noted in its FOI response. “We cannot release the information until after it has been tabled.”

Auditor’s reports revealed earlier this year that the pensions board had tentatively agreed on an “accelerated” evaluation of the pension system funding to be completed in January 2010 “to determine the impact of the financial crisis on the adequacy of the funding” for the various pension plans.

According to a response received from the board last month: “The actuary did recommend that the timing of the next funding valuation be accelerated to January 2010; however, this was not acted upon due to other pressing matters.”

Typically actuarial evaluations are completed by the pensions board once every three years. Government auditors confirmed the January 2011 report is now being worked on. The report is basically a review of the financial state of the system – which serves as the retirement fund for Cayman Islands civil servants, judges, and lawmakers.

The evaluation determines how much unfunded liability – potential future debts not covered by current assets – a pension fund contains. Those liabilities are generally estimated over a rolling 20 to 30 year period.

Absent from government ownership agreements in the current year’s budget was information available on net assets, total liabilities or net worth of the Public Service Pensions system. That information had previously been provided up through the 2010/11 budget year.

There was no explanation provided in the records as to why the figures had been left out of the government’s ownership agreement documents for 2011/12.

There are two types of retirement accounts for civil servants under the public service pensions plan; a defined benefit account, which provides monthly pension payments for retired government workers; and a defined contribution account, which provides a yearly lump sum payment to retirees, with the potential of a one-time payment of up to 25 per cent value of the account.

The unfunded liability figures apply only to the defined benefit accounts and were estimated in the most recent Cayman Islands government budget at about $188 million.

However, that figure is derived from a 2005 actuarial report and has never been changed since the 2008 actuarial report was completed.

In a public bond offering from 2009, the Cayman Islands government put its public sector pension unfunded liability at US$248 million (approximately CI$204 million). That was based on the 2008 actuarial report which has not been released.

A more recent estimate from mid-2009, put the unfunded liability figure at US$325 (CI$266 million).

A higher projected liability generally means that government would have to pay more each month for each civil servant’s retirement fund to ensure future payments can be made, according to Auditor General Alastair Swarbrick.

A lower projected liability could serve to lower those payments.

Public service pension liability figures also impact the overall net worth of the Cayman Islands government.


  1. 248 mil estimated unfunded liability in bond issue of 2008 increased to 325 mil in mid 2009! So lets just guess 188 mil for the current budget and ignore the other prior trend of estimates for nobody has any idea! Soon we could be talking real money!Thankfully it is only owed to civil servants.Sounds like more of the Free Lunch is over!

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