For Val Danulescu it was not a difficult choice. The day the Pensions Law changes were announced was the day he decided to leave.
He looked at the money in his retirement fund, crunched some numbers and began packing his bags.
“It was a simple calculation,” he told the Cayman Compass.
After nine years in Cayman, he had nearly US$80,000 in his pension fund. Together with some savings, it was enough to invest in a property in his home country, Romania.
With rental income and resale values, he figures he could double his money in 30 years.
But the change to the Pensions Law left him with a relatively short window to leave the island or face waiting until he reached retirement age to access his money.
The track record of his pension fund over the preceding years did not inspire confidence.
“When I looked to my pension account, it recorded some increases, then some decreases, and after almost nine years was a bit less, compared to the scenario in which I would have left the money in a savings deposit with no interest.”
With the permanent residency process uncertain, Mr. Danulescu, who has worked as an engineer for several companies, including C3, decided to take his money and leave.
He expects a lot of people reaching seven or eight years in Cayman, with significant sums in their pensions funds, to follow suit.
The Chamber of Commerce, the Cayman Islands Tourism Association and several major employers warned last month that businesses face the prospect of mass resignations from workers who want early access to their savings.
The Chamber estimates as many as 2,500 people could leave the island before the end of this year, when the new rules start to impact workers. Some politicians have dismissed those estimates and suggested the number is likely to be far lower. Others, like independent Al Suckoo, have highlighted the expected exodus as an opportunity for unemployed Caymanians, while some, including Opposition Leader McKeeva Bush, say they would roll back the change to prevent serious problems for Cayman’s economy.
The reforms effectively close a loophole that has allowed workers early access to their savings within two years of leaving the island. Anyone moving overseas from December 2017 onward will only be able to access their money when they reach retirement age.
Government has defended the reforms and said it will bring Cayman’s pension regime in line with the rest of the developed world.
But businesses have warned they will face skyrocketing turnover this year as a result.
Some workers have already left. Others, like Albert Cabudoy, who works at Vigoro landscaping business, are waiting to see if the election changes the equation.
“I’m thinking about it, but I will stay until the election and see what happens. I heard Ellio Solomon (independent candidate) say he would change it, so I will see if the election makes a difference.”
If not, he said, he would likely leave before the end of the year.
“With that money I can start something at home, like a business. I am 40, so I can’t wait till I am 65, if I’m still living, to get the money.”
Mr. Cabudoy, who has been in Cayman for 13 years, returning home to the Philippines for a year on rollover, said the money in his original pension fund had gone down in the last few years.
He said many people from the Philippines are in the same position and would likely leave to gain access to their savings for business or property investments back home. He estimates, based on conversations with friends and colleagues, that as many as half of the workers from the Philippines could leave the island as a result.
“A lot of people want to share their feelings about it, but they can’t communicate what they feel. They don’t like what happened,” he said.
A woman, also from the Philippines, who works at The Ritz-Carlton, Grand Cayman, said she and her husband, who also works in tourism, had no choice but to leave.
“We bought property in the Philippines and we already allotted the money to pay the mortgages,” said the woman, who asked not to be named.
“I am only 30; I can’t wait for another 30 years to get access to the money. It is money that I earned.
“The reason why we are here is to save money. I think it is unfair for them to change the law at this point.”
Government suggests no further compromise
Government has indicated there will be no further compromise on the plans, despite the concern from workers and businesses.
Some politicians, including Mr. Bush and Mr. Solomon, have indicated that if elected, they would repeal that aspect of the law and allow workers to take their funds with them when they leave. Others, like Bodden Town independent Al Suckoo, believe an exodus of expats would help deal with Caymanian unemployment.
Labor Minister Tara Rivers, speaking at a candidate debate last month, defended the change, saying it brought Cayman’s system in line with international standards.
“Everybody that understands the principle of a pension understands that pensions are for retirement and retirement is wherever you are.
“Those persons can get that money in a lump sum upon retirement or they can get payments from the Cayman Islands however they choose,” she said.
Departing expatriates also have the option of transferring their pension savings to a similar fund in their home country, under the new legislation.
In response to questions from the Cayman Compass, a spokesperson for Ms. Rivers’s ministry said it had already considered and accommodated the concerns of businesses, which fear they will lose employees, by allowing a year of leeway before that aspect of the law was implemented.
“The 12-month transition period was introduced to allow employees to have ample time to make a decision and preparation with respect to their future employment within the Cayman Islands, and to allow businesses ample time to make the necessary recruitment adjustments for business continuity.”
Businesses had also highlighted concerns that the Immigration Department will need to be ready to handle an unprecedented number of work permit requests as they look to replace large numbers of employees this year.
The Immigration Department did not respond to questions from the Compass about its state of readiness, but the Ministry of Education, Employment and Gender Affairs said it was “monitoring the situation” and urged businesses to seek to fill vacancies by hiring locally.
“The ministry does encourage potentially affected businesses to ensure that they follow the Immigration Law with respect to making best efforts to identify and hire suitably qualified Caymanians and permanent residents, prior to seeking labor from outside of the jurisdiction,” it said in a statement.
The official said government did not believe it was necessary to allow expats who had been hired under the old law, and who may have planned their finances on the belief that they could access their pension fund when they left the island, to be dealt with any differently to new hires.
“The ministry does not have a desire to apply pension legislation differently to non-Caymanians, nor does it have a desire to create an additional administrative burden to operate or monitor two separate systems depending on when a person was hired.”
Explaining the legal change, the ministry indicated the “refund option” was an anomaly in the previous law that does not exist in other jurisdictions.
It said removing the ability for departing workers to take their pension funds with them in a lump sum payment would mean “more funds remain and grow in the local pension funds – which is a benefit to everyone who is a member of a pension plan in the Cayman Islands.”
The statement also raised the possibility that under the old law, employees – both Caymanian and non-Caymanian – could leave the island and cash out their retirement savings and later return to Cayman, becoming a burden to the state.
“This policy shift was deemed necessary in order to minimize the possibility of persons accessing and depleting their pension benefits prior to retirement, and then subsequently becoming wards of the country later in life,” it said.
Politicians weigh in
Several politicians weighed in on the issue, with the Cayman Democratic Party leading calls for that part of the law to be walked back.
Mr. Bush said he believes the change in policy was unfair, would be bad for the economy and for Caymanian businesses and should be repealed.
“When elected, we will seek to revamp the law. It is not fair. You don’t want people here but you want to keep their money? I don’t think that’s right. You can’t have your cake and eat it.
“I’m not saying 2,500 people will leave, I don’t know if it will be that many. Yes, it will free up some jobs, but look what else it will do to the economy. There are far too many Caymanians out of work for the good of the country, but if you get that many people leaving at once, you can bet that would be a serious blow to our economy.”
Other candidates questioned whether the predicted exodus would actually happen, while some highlighted it as a good thing.
Speaking at a national election debate, independent member for Bodden Town Al Suckoo said any such exodus would be an opportunity to help deal with unemployment.
“We have tourism businesses telling us there’s going to be a mass exodus of people from these islands,” he said. “Why haven’t they embraced and prepared and trained Caymanians to take those jobs? Why is it now that they’re going to go out and raise the alarm that they’re going to lose 2,500 employees. There should’ve been 2,500 Caymanians prepared to take those jobs. What they need to do is register them with the NWDA and stop the scare-mongering.”
According to the most recent labor force survey, Caymanian unemployment was 7.1 percent, just over 1,400 people, in October last year.