Pensions plan nets booming returns

MLAs pensions still in trouble

Although the government has yet to release evaluations of its public service retirement funds that were completed in September, it appears the pension plans stand in much better financial health than in recent years. The one exception is the Cayman Islands elected lawmakers’ retirement plan, which, as of the latest actuarial evaluation, was barely funded and was in danger of running out of money as of last year, according to auditors.  

“Assets allocated to the parliamentary pensions plan cover only 23 percent of the past service obligations. The plan’s assets are also insufficient to cover the benefits currently in payment,” an auditor general’s evaluation of the retirement plan stated.  

Acting Deputy Governor Jennifer Ahearn told the Legislative Assembly on Monday that the overall performance of the three retirement plans maintained by the government – one for civil servants, one for lawmakers and one for the judiciary – had seen vast improvements between 2011 and this year.  

Annual reports showed net assets maintained by the three retirement plans increased from about $340 million in 2011 to nearly $485 million as of June 30, 2014 – a total increase of some $145 million. The Jan. 1, 2011, pension plan evaluation put total liabilities of the pensions funds at $495 million. No figures had been released on liabilities as of the Jan 1, 2014, report.  

Mrs. Ahearn said the sharp increase in retirement plan assets was due to “a combination of the strong investment performance of the fund as well as the government 
contribution toward the past service [pension] liability….in the amount of $12 million [during the 2013/14 budget year].” The Jan 1, 2011, actuarial report put the total unfunded liability of the government retirement plans at $166 million.  

The report recommended that contributions to the retirement fund for both civil servants and elected lawmakers should be increased. Now, civil servants contribute 6 percent of their monthly salaries to the retirement fund, with a matching amount contributed to the government.  

For civil servants, a relatively modest overall contribution increase from 12 percent to about 15.6 percent was recommended by actuaries.  

“The actuary has determined that a continuation to the defined benefit plan [close to 12 percent of salaries] is projected to result in the depletion of the defined benefit allocated fund by the year 2026,” the auditor general’s office stated in its evaluation of the Public Service Pensions Board annual report for 2013/14.  

For the much smaller retirement fund maintained for Cayman Islands legislators, the financial problems were much worse.  

As of January 2011, the value of the parliamentary pension plan assets was $3.8 million, while liabilities were $16.7 million, putting the overall unfunded liability at $12.9 million over a rolling 20-year period.  

“The annual cost of the defined benefit component of the [legislators’ retirement plan] as at Jan. 1, 2011 would require 119.5 of total pensionable emoluments,” the auditors noted. In other words, this means pension contributions for legislators would have to increase to more than 100 percent of their annual salaries in order to deal with the fund liability over a 20-year period.  

The retirement fund for members of the judiciary was in surplus as of Jan. 1, 2011. 

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