A number of critical issues regarding how private sector retirement plans will be managed, including when individuals who are now 60 to 65 years old can receive full retirement benefits and how much they can take out of their pension savings accounts each year have been left up to Cabinet to decide.
Lawmakers approved sweeping changes to the National Pensions Law last week, the first significant amendments made since legislation took effect in 1998. However, opposition party and independent Legislative Assembly members still seemed uncertain – even after a vote was taken on the legal changes – how various issues would be handled.
For instance, North Side MLA Ezzard Miller questioned the government concerning how the private sector retirement plan could equate to “income replacement” when current rules only allow retirees to withdraw up to $12,000 per year from their savings plans.
Employment Minister Tara Rivers, who has oversight responsibility for pensions matters, said the issue would be addressed at a future date in regulations to the National Pensions Law. Those regulations do not require a vote of the full Legislative Assembly and can be approved by Cabinet members directly.
“[Legal drafters] are looking at the actual schedule that is being used currently to pay the monthly payout when you reach the age of pension entitlement,” Ms. Rivers said.
Opposition leader McKeeva Bush asked how long the changes might take to come into effect. “We’re not going to wait another 18 years to make the changes that we need to these bills,” the minister said.
North Side MLA Mr. Miller, long a critic of government’s current private sector-led retirement investment regime, said the low limits on pension withdrawals were just one example of how the nearly 20-year-old National Pensions Law had failed the territory.
“It was never intended to provide poor working Caymanians with adequate income replacement,” Mr. Miller said. “The people that we try to convince ourselves that we are doing this for aren’t getting [anything] out of it.”
Mr. Bush also noted that there appeared to be a good deal of confusion around what would happen to people who are at or near age 60 right now. Previously, the law set 60 as the “normal” retirement age. The new legislation makes 65 the age at which a person is entitled to their full pension.
The opposition leader said there is uncertainty on the part of older workers regarding when they can retire and what benefits they will receive if they do quit work prior to reaching age 65.
Minister Rivers said the main reason for the legal changes was to ensure that no capable workers were “forced out” of a job simply because they had reached age 60 or even age 65. However, she said Cabinet would later make an order regarding workers who had already attained age 60 prior to the law taking effect.
The Cabinet order, which has not yet been issued, will deal with any transitional provisions with regard to any private sector workers who are age 60 or above now.
Early retirement is also still contemplated under the new legislation, however, the date set for that has been pushed up five years. Under the previous National Pensions Law, age 50 was the earliest date set for retirement. The new legislation sets 55 as the earliest retirement age.
Mr. Bush asked whether the person who wishes to retire at age 60 under the new law would be “disenfranchised” at any point.
Minister Rivers reiterated that Cabinet would set the transitional provisions for those workers. “But certainly … the purpose is to try to ensure that the people who want to continue to work aren’t forced out at age 60,” she said.
Mr. Miller then asked whether conditions for early retirement would be changed under the new legislation.
Ms. Rivers responded that there were still areas in the National Pensions Law that government believed it needed to “strengthen moving forward.”
“That’s just another section of the bad law,” Mr. Miller said.