The government is seeking public feedback on proposed amendments to the National Pensions Act, which would allow Caymanians to withdraw money from their pension plans to buy or build homes or pay off their mortgages.
If passed, the bill would mean that pension plan holders could withdraw up to $50,000 – increased from the existing $35,000 – to put towards a home purchase or construction.
The amendments also include a provision to allow homeowners to withdraw a maximum of $50,000 for a reduction payment on an existing mortgage or residential land loan.
They would also allow people to withdraw up to $100,000 to pay off an existing mortgage. Under the existing act, a maximum of $35,000 is allowed to be withdrawn for that purpose.
However, for those who withdraw the funds, the bill requires them to repay an additional 3% contribution (up from 1%) into their pension plan.
“These proposed amendments will provide more flexibility to pension plan members,
allowing them to make withdrawals for essential purposes while also requiring repayment to avoid jeopardizing their long-term financial security,” the ministry’s press release noted.
The bill was drawn up after lawmakers voted unanimously for a private member’s motion brought to Parliament by Chris Saunders in June, calling for an increase in pension withdrawals to help people struggling with mortgage repayments or to find the cash to buy their own homes.
Saunders had been expected to ask for an update on the matter at the current sitting of the House, but withdrew his question following the publication of the bill, which is dated 18 Sept.
In a press release issued this week, Minister for Labour Dwayne Seymour said the aim of amending the National Pensions (Amendment) Bill 2023 was to assist every Caymanian in owning a home.
“We recognize today’s struggles, but with this amendment, we’re paving a pathway for our people to pay off or reduce their mortgages or purchase or build homes,” he said.
Duplexes added to bill
The pensions bill also addresses changes relating to the legislation’s wording, to allow pension withdrawals to be used to purchase or construct a duplex, as the previous laws did not expressly permit this.
The bill expands the content that must be included in the letter applicants obtain from the financial institution as part of the application process. Additionally, the bill continues to require restrictions on applicants’ property and extends the duration of the restrictions into post-retirement in the event the property is sold.
It also introduces new requirements, including any withdrawal for the applicant’s primary
residence and for applicants to prove the repayment or ongoing repayment of any past property withdrawals.
Members will also be able to withdraw their existing additional voluntary contributions
to make a reduction payment on their existing mortgage or residential land loan. Under the National Pensions Act, members are not required to repay other voluntary contributions, whereas mandatory contributions withdrawn for property purposes must be repaid to the pension plan.
Two new sections are also being proposed. If the pension funds withdrawn are not used
for the intended property, they must be returned to the pension plan administrator within six months of withdrawal, except where the dwelling unit is being constructed. If the total withdrawal was not used, it must be returned within 12 months of the withdrawal.
The public consultation period for the bill ends at midnight on 16 Oct. 2023. Members of the public can share their feedback by emailing the ministry at [email protected].
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