Some Caymanians who have recently moved from private sector jobs to government employment have been surprised to discover that their pension savings cannot come along with them.
Private sector retirement accounts cannot be transferred to the pension funds managed by the Public Service Pensions Board, Acting Pensions Superintendent Mario Ebanks confirmed last week. That has always been the case since the creation of the government retirement savings plan, Mr. Ebanks said.
Prior to 2000, public sector retirement plans operated on a defined benefit basis, meaning the benefit was paid for a worker’s entire life at a fixed rate. However, since April 2000, the public sector retirement funds have switched to defined contribution plans, which operate as savings accounts with fixed total assets, rather than fixed payments. There is no difference now in the makeup of the public sector pension plans and the private sector plans.
Mr. Ebanks said the government is now attempting to assist Caymanian civil servants who are left with dormant pension funds from their private sector jobs.
Those monies can be used under the government housing withdrawal program approved by the previous government, Mr. Ebanks confirmed, even though the affected workers are now civil servants.
“These interim arrangements allow those qualified civil servants the ability to participate in the housing withdrawal program in their former private sector pension plan, as long as their public sector employer and the Portfolio of the Civil Service [is] able to facilitate the arrangements, for example with repaying the 1 percent extra contribution with payroll,” Mr. Ebanks said.
Private sector pension savings accounts can be used by Caymanians to put a down payment of up to $35,000 on a home intended to be used as a primary residence. They can also be used to pay off the remaining balance on a home or to buy a piece of land.
The ability to use retirement funds for these purposes was extended only to Caymanians working in the private sector. Civil servants cannot use pension funds invested with the Public Service Pensions Board.
If they intend to use their private sector accounts to invest in a home or property, that is allowed, as long as the government agrees to let the now-civil servant invest an additional 1 percent of their salary in the dormant private sector retirement account.
“Only a few civil servants have used this facility to date, and arrangements are still being worked out to clarify the procedures,” Mr. Ebanks said. However, the government has recently received additional questions about the issue and decided it needed further explanation.
Non-Caymanians and Caymanian civil servants who are participants in the Public Service Pensions fund that do not maintain private sector accounts cannot participate in the swap.
A private members motion to the Legislative Assembly in 2013 asked the government to consider making civil servants eligible for the pension-for-property swap.
The plan has not moved forward since and there is some opposition to allowing it within the public sector.
“One needs to ask, what is the purpose of a pension?” asked Civil Service Association President James Watler. “Simple answer is for when you retire, something that you can hopefully still put bread on the table and live to some degree without having to be placed on social services.”
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I would like to refer to the final paragraph which states: One need to ask, what is the purpose of a pension? asked Civil Service Association President James Watler.
Simple answer is when you retire to put bread on your table and not having to be placed on Social Service. That’s Fair enough. However; how can this apply to the many Caymanians who did not have this opportunity, and only receiving between 70.00 and 100.00 a month pension to survive. They have no alternative but to go to Social Service for assistance to put bread on their table.