We imagine that Moses’ leading the Israelites out of Egypt was a more orderly affair than Cayman’s “pension exodus” – where hundreds of expatriate workers are packing their bags and leaving, so as to avoid being swept up in last year’s changes to the National Pensions Law.
Operating according to motivations that have never been fully explained (which makes us very nervous), the Legislative Assembly decreed that foreign workers employed by private businesses will no longer be allowed to “cash out” mandatory pension funds after they leave the islands. Any worker who wants control of his or her savings must cease their employment before the end of the year … or, perhaps, the end of the month … maybe.
There are many things wrong with this government-created situation, on multiple levels.
The government’s scheme of forcing private sector workers to “set aside” 5 percent of their income (and forcing employers to match those savings, dollar for dollar) is fundamentally flawed. It doesn’t take an actuary to understand that saving 10 percent of one’s income falls far, far short of a viable retirement plan.
Here’s some simple math: Say you work for 40 years, diligently socking aside 10 percent of your income. At the end of your career, that translates to four years’ worth of income. How many “golden years” do you plan on living, after you retire?
The numbers are further from adding up when you consider the cases of expatriates who are in Cayman for only seven or eight years.
It makes even less sense when one considers the situations of most of our expatriate workers. Under the new rules, employees must keep their pension money in Cayman until they reach retirement age, or else transfer those funds into a similar retirement savings account in another country. That is simple enough for British, American, Canadian and European workers.
But what about workers from Jamaica or the Philippines, the home countries of more than half of Cayman’s foreign workforce? There, only about 30 percent of the adult population even has a formal savings account, according to the World Bank Global Findex.
Over the years, a reasonable workaround was developed for Cayman’s expatriates – treating those pensions plans as “long-term savings accounts” they could tap into a couple of years after leaving the island. Much of the time, that pensions cash was then used to invest in a home or income-producing ventures such as small businesses.
But now, (like they have done with immigration) Cayman’s government has changed the rules of the pensions game for expatriates. That has spurred hundreds of people to make potentially life-changing personal decisions, which in turn has affected businesses who must scramble to fill unexpected vacancies, en masse.
And now, as a final insult to injury (or finger in the eye, or kick in the rear), it seems government has not been able to get its story straight on what the rules are, exactly, for these departing workers to access their pension funds.
In the absence of public and precise government instructions, the job of “explainer” has fallen to private pension providers, with uneven results.
“We believe there’s a high level of confusion among people applying for these pension refunds,” said HSM law firm managing partner Huw Moses. (No direct relation to the biblical figure.) “It appears the law is being interpreted differently by different providers.”
Retirement needs and expectations differ from place to place, and from person to person. Holding workers’ pension funds hostage out of (real or feigned) concern for their long-term financial well-being is condescending and counterproductive.
The government should never have forced employees and employers to adhere to those pension plans in the first place. But now that they have been created, those pension funds rightfully belong to Cayman’s workers – not the pension providers or the government. How and when they spend the money should be no one’s business but their own.
Similarly, the government should never have changed the law to prevent foreign workers from accessing their pension funds. But now that they have, the least they could do is provide clarity on how to follow their damaging (and highly suspect) law.