Government must approve pensions fund transfers

The Department of Labour and Pensions office is located at 256 Creek Road and will be open from 9 a.m. to 4 p.m.

Cayman’s Department of Labour and Pensions is required to approve any transfers of pension funds to retirement savings accounts outside the territory’s borders, but thus far, local pensions administrators said they have received little or no guidance as to what criteria will be used by government to green-light those funds transfers.

As of Dec. 31, 2019, private sector pension plan participants will no longer be able to “cash out” their retirement savings after leaving the islands, although they can still transfer their funds outside Cayman after that date to another similar pensions/retirement savings fund.

However, the process for how those transfers are to be effected is not well understood, even by some of the pensions fund administrators.

“It was … the various plan providers’ understanding that the Department of Labour and Pensions would be putting together a list of countries and names of institutions that they have already approved transfers to,” said Randall Fisher, director of operations for the Chamber Pension Fund, the island’s largest multi-employer pension plan. “Nothing has been forthcoming, though.”

Director of Labour and Pensions Bennard Ebanks said Monday that the ability to transfer retirement funds away from Cayman remained an option for plan participants and the decision to do so “rests solely with the [pension plan] member.”

Mr. Ebanks said the plan member must still meet the criteria under the National Pensions Law to effect the funds transfer including the termination of their employment in Cayman, proving that the have not made a pension contribution to the plan in at least two years and that they have not lived in Cayman for at least two years.

The savings transfers will depend to a certain degree on the transfer country’s financial regulatory regime, he said.

“The Cayman Islands is a non-income tax jurisdiction and permits overseas pension transfers to products such as the United States traditional Individual Retirement Account (IRA) and Canada’s Registered Retirement Savings Plan (RRSP),” Mr. Ebanks said. “The Department of Labour and Pensions have approved transfers to numerous international Pension Plans and the vast majority of these are successful.

“However, other countries have a different legislative and regulatory requirements which may include an income tax system which would likely be a consideration for members. As such, the member needs to investigate the options available in their home jurisdiction and properly research the implications of any such transfer.”

For instance, in the U.S., the standard IRA account will deduct taxes from the amount saved at the time the plan member makes a withdrawal. A Roth IRA will deduct taxes at the time the member makes the contribution. However, the U.S. tax code does not consider many foreign pensions a “qualified trust” under the law, so depending on the pension plan, transfers can be problematic.

Canadian pension withdrawals are generally considered taxable income, as well, so if the Canadian plan does accept the funds transfer, they will be taxed upon withdrawal.

Mr. Ebanks said the local pensions plans will provide guidance to plan members who wish to perform a transfer, providing them with the “necessary forms.”

He notes there is another option for pension plan members here who are leaving the Cayman Islands after the deadline for cash refunds passes. “The member is free to leave their pension benefit within the Cayman Islands and subsequently collect it, when they are eligible for early or normal age of pension entitlement [normal age of pension entitlement is 65 under the current law]. It is critically important that the member provide their pension plan administrator with updated mailing and email addresses so they can continue to receive their pension statement.”

Pension administrators contacted by the Cayman Compass said they have transferred retirement funds to analogous savings plans in the past, and have used that as guidance for the present situation. In practice, relatively few funds transfers have been made, since plan members have been able to receive cash payouts.

Silver Thatch Pensions and the Chamber Plan identified a number of foreign retirement savings plan providers to whom they have transferred funds in the past. Those include:

  • ATO Regulated Self-Managed Superannuation Fund (Australia)
  • JAX Federal Credit Union (Florida, U.S.)
  • SBI Life (Mumbai, India)
  • STM G.I.B pension transfer plan (Malta and Gibraltar)
  • Bank of America Traditional IRA (U.S.)
  • AON Kiwisaver scheme (New Zealand)
  • WEA Trust 401K plan (Wisconsin, U.S.)
  • SanSuper Superannuation fund (Brisbane, Australia)
  • Scotia Jamaica Life Insurance Company (Jamaica)
  • RBC – Locked-In Registered Retirement Savings Plan (Canada)
  • BWCI Pension Trust Ltd. (Guernsey).

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  1. What is wrong with these rules ? All this confusion and inconvenience to everyone. Just Grand father the older pensioners to obtain their monies when they choose ! Did anyone think of this before they made this rule why are the past members effected by a new ruling ? This has caused great issue with employers and employees for what! why does Cayman Pensions feel they have to control other peoples money. WHY! There mus t be an issue maybe they don’t have it ? to give back ! These people are not even Caymanian, this makes no sense to anyone and if no one can figure it out remove it !