PAC: Cultural shift needed to increase pension transparency

A Public Accounts Committee meeting this week highlighted a lack of transparency regarding the performance, fees, administration and regulation of pension funds in the Cayman Islands.

The meeting was prompted by the failure of the Department of Labour and Pensions and its related ministry – the Ministry of Employment and Border Control – to release the annual reports of the National Pension Board since 2008.

It is a statutory requirement under the National Pension Law for the annual reports to be submitted to the minister, who should table them “immediately” after in the Legislative Assembly.

In March 2020, the ombudsman ruled in a Freedom of Information request that “a reasonable period of time” had expired for the department to make the annual reports public and ordered their release within 90 days. In May, the department released the reports for the years 2008 to 2016.

In arguing for the release of the requested information, the FOI applicant told the ombudsman that the pension regime was distrusted because ministers, ministries, chief officers and the superintendent of pensions had failed to ensure the pension regime is operated exclusively “for the benefit of employees in the Islands”, the definition used by the National Pension Law.

“Indeed, they are the only stakeholders in pension matters. All others involved in pensions, including the pension regulator, are well paid for services by employees/members,” the applicant said.

MLA Chris Saunders emphasised this point in the PAC meeting on Wednesday, saying the funds in the pension plans are “the people’s money”, regardless of the government of the day.

Saunders noted that exactly when most pension plans were hit by the financial crisis in 2008, the pension regulator ceased to publish annual reports, which could have provided plan members with important information about the impact on their savings.

“It is this culture that needs to change,” he said, “and pension plan providers also have a role to play.”

Even in their current form, the annual reports were of no use to savers who want to compare different plans, he said.

While individual plans are required under the law to have audited accounts, hold annual general meetings and provide information to their members, obtaining information from all the providers still proves difficult.

“Can you realistically expect someone to change from one pension plan to the next, if you have no idea how the other pension plan is even performing?” Saunders asked.

He acknowledged that better public education around pension matters was needed, but he said the public also needs access to relevant information.

Amy Wolliston, the deputy director of pensions in the Department of Labour and Pensions, said a 2016 amendment to the law had recognised that more public information is needed to effectively compare different plans. The legal changes require plans to publish their expense ratios and investment returns.

However, Saunders pointed out that, in preparation for the PAC meeting, he had difficulty obtaining this information from the individual websites of plan administrators.

“The fact is the amount of information that is out there it is actually very lacking,” he said.

Saunders noted that the pensions department, with a total of eight staff, did not have enough resources to effectively regulate nine pension-plan providers and more than 73,000 pension accounts.

Radical review

The committee heard that sections of the 2016 amendment have not yet been implemented because a commencement order has not been issued by Cabinet.

Wesley Howell, chief officer in the Ministry of Employment and Border Control, confirmed that the current minister – Premier Alden McLaughlin – “would like to see more of a radical reform of pensions” and that this has caused “a bit of a stalemate between executing the remaining sections of the 2016 amendment or going to a more radical national pension system”.

New investment regulations, however, would be able to move forward, he said, adding that these amendments to the investment regulations would bring more diversity and private pensions more in line with the guidelines for the more flexible public service pension plan.

Another issue elicited by the committee is the absence of a functioning National Pensions Board. The board’s last meeting was in February 2019 and all board appointments have expired.

Howell explained that the board matter “got caught up in the Transition Law”, which not only reshuffled ministerial responsibilities but also took away some responsibilities from the National Pension Board.

Howell said board members had expressed their frustration about the timeliness of data delivered to them and their ability to fulfil their mandate in relation to making recommendations on how pensions could be improved.

“So, we have proposed the reappointment of the board, seeing that the board remit has changed significantly in that the oversight of the investments are now vested in the government,” he said.

A proposal outlining the terms of reference for what board members are expected to deliver under the law is currently with the minister and new appointments should be made soon, Howell said.

The new board could also be tasked with starting a public consultation on a more radical review of the pension system, he added.

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