Pension plan contributors do have a choice

I read with interest the article in the Caymanian Compass titled “Little faith in pension plans”, which gives the outcome and comments in the on-line poll asking “How much faith do you have in your CI pension plan?”

Given that stock markets globally experienced their biggest decline since the Great Depression between June 2007 and March 2009, it is hardly surprising that there is a degree of disillusion with pension plans.

Contributors to multi-employer pension plans have a choice of plans. If your plan is losing you money after five years and nine years as two respondents wrote, you should switch plans. Some multi-employer pension plans have generated investment returns for their contributors considerably higher than if you had made monthly deposits into a bank account. Switch to a better performing plan.

If your pension plan provider does not respond to questions as one respondent said, switch plans. If you think there are strange things going on as another respondent said, ask for an explanation. If you don’t understand the explanation, ask someone who you think might understand. If they don’t understand the explanation, contact the Office of the Superintendent of Pensions.

Another respondent said that the money should be invested here in Cayman. That is probably not a good idea. If that happened, most of the money would likely be invested in Government bonds. Look at what has happened in other Caribbean islands where national insurance schemes have effectively become the buyer of last resort for domestic government bonds. As a sidebar, St. Kitts recently defaulted on its debt and Jamaica “restructured” its debt in February 2010, extending the term and lowering the interest rate on existing debt.It is your responsibility to make sure that you have enough savings when you retire. My observation is that most people spend more time deciding which fridge to buy than which pension plan they should select to invest their savings for retirement. This is evident from the very poor attendance at pension plan AGMs. Get involved in understanding how your money is being invested for retirement.

The Cayman Islands National Pensions Law was drafted so that the employee ultimately has the choice of which pension plan they select to invest their savings for retirement. Don’t complain.

Speak to your employer.

Take action.

Desmond Kinch