Cayman Islands tourism sector managers fear “skyrocketing turnover” within the next year, following government’s decision to set a cutoff date for when workers can receive cash refunds from their retirement accounts.
That date, around the end of next year, depending on when an employer makes the final payment into a worker’s private sector pension account, will encourage many workers to leave Cayman to collect money already saved, some members of the Cayman Islands Tourism Association said Tuesday.
Changes made this year to the National Pensions Law will serve to prevent workers from receiving cash refunds from their pension accounts after December 2019. However, in order to receive such a refund under the current pensions scheme, the employee must have stopped making contributions to the retirement fund for at least two years and must also have left the islands for at least six months.
That means, to collect a refund, most workers would have to quit their current jobs and have made their final pension contribution as of Dec. 30, 2017. The National Pensions Law applies only to private sector pensions, not the government worker retirement plans run by the Public Service Pensions Board.
“One of the problems that [the amended pensions law] will cause is skyrocketing turnover,” said Valerie Hoppe, the human resources director of the Grand Cayman Marriott Beach Resort. “We will have a lot of people leave the Cayman Islands, whether they are expatriates or Caymanians.”
Ms. Hoppe said in many countries where workers earn much less than in Cayman, the retirement savings represents employees’ “nest eggs,” which they plan to invest in property or live off of when they return home.
“So get prepared, employees will be resigning to take those funds with them,” Ms. Hoppe said.
The news is not all bad from the new pensions regime, Ms. Hoppe and dms Senior Finance Manager Victoria Taylor told about 60 CITA members gathered at The Ritz-Carlton, Grand Cayman to hear the details of changes to the retirement scheme. Both women agreed that changes to allow pension plan members to contribute more money for longer periods into the respective plans are positive developments for the islands.
“We commend the government for thinking long term,” said Ms. Taylor.
However, staff turnover, especially at some of the larger hotels and tourism operations, could be significant, which means human resources-related costs would increase as well, Ms. Hoppe said.
“If you’re a large employer … you may be looking at upwards of 80 to 100 people leaving,” she said.
Janette Goodman, who moderated the CITA discussion panel, noted that 80 to 100 workers would be about one-third of the Marriott’s total staff. “How do you plan to mitigate that?” she asked.
“We need to start now; it won’t be a normal recruitment year,” Ms. Hoppe said, adding that the Marriott would probably start recruiting for the 2018 tourism high season in January or February.
Ms. Taylor said those workers now have “a year to plan” their exit from Cayman, if they are so inclined. Also, she noted that workers with less than $5,000 in their retirement savings accounts could still get cash refunds even when the changes to the law take effect.
“But recruitment will be your biggest battle,” Ms. Taylor told the CITA audience.
How it works
The changes to the National Pensions Law do not prevent retirement savings funds from being transferred from the Cayman Islands to an analogous retirement plan outside the country after December 2017. The new law restricts workers’ from getting a cash refund of their pension before retirement, unless their account holds less than $5,000.
“We routinely deal with overseas transfers,” said Pensions Superintendent Amy Wolliston. “The U.S., Canada, the U.K … they all have established plans that we have transferred to in the past.”
In order to access a pension refund before the change in the law, the worker would have to ensure their final payment, or payment on their behalf by an employer, was made into the account before Dec. 31, 2017. The key, Ms. Wolliston said, is not when the worker leaves their job or leaves the islands, it is the date when the last pension payment was made.
The cash refund could then be received before Dec. 31, 2019 – the date which government has set as the deadline by which all pension refunds under the current law must be paid.
CITA members asked whether a worker who left the islands seeking a cash refund from their pension account might be penalized if an employer made a pension payment late or was delinquent in paying into the account. Ms. Wolliston said it is the policy of the National Labour and Pensions Office not to penalize workers for their employers being in arrears, and in such a case she believes they would be able to receive a refund.
Ms. Goodman, asking questions submitted on behalf of CITA members, queried whether a worker from a country that did not have such well-recognized pension providers as the U.S. or the U.K. would lose those funds if they attempted to transfer them to their home country.
Ms. Wolliston said if workers are concerned about that, they could leave their pension funds in the Cayman account and arrangements could be made upon retirement to withdraw funds directly from here.
“It is important to ensure that as a member, your pensions plan has your up-to-date information,” she said. “I can’t tell you how important that is.”
Cayman Turtle Centre boss Tim Adam asked during Tuesday’s meeting whether any country in the Caribbean region has a similar pension scheme that allows workers to access pension funds before retirement after they stop paying into the account.
“We actually can’t identify another jurisdiction where the primary retirement savings product would allow persons to get a refund,” Ms. Wolliston said. “That is a rather unusual activity.”