As the implementation of the amended National Pensions Act continues, those seeking to make use of the long-awaited provisions have been requesting additional information on the process.
The Department of Labour and Pensions said both they and pension plan administrators have been fielding a lot of questions on how to apply under the amended law.
In this article, we will look at the new provisions and the process to make withdrawals under this legislation.
Why was this done?
In November, MPs unanimously voted to increase withdrawal limits from private pension funds for mortgages, home purchase or construction.
This change came against the backdrop of increasing interest rates and Caymanian families struggling to keep up with mortgage payments as a result of climbing interest rates.
Who can access their funds?
Only Caymanian private pension plan members can access their funds for the stipulated purposes under the amended law. The DLP says people under the public service, parliamentary or judicial pension plans are not able to make withdrawals as they are governed by different legislation.
How much can I get?
Included in the key amendments was an increase in the maximum withdrawal allowed for home purchase or construction from $35,000 to $50,000, and allowing a maximum of $50,000 for a reduction payment on an existing mortgage or residential land loan.
There was also an increase on the withdrawal amount to pay off an existing mortgage from $35,000 to $100,000. These amounts are applicable based on the sum of funds in the individual’s pension and the required amount contained in the financial institution’s letter.
What types of withdrawals can be made?
Under the law, withdrawals are allowed to put down a deposit to purchase an existing dwelling, to construct a new dwelling unit or to purchase residential land.
Withdrawals for reduction payment on a residential land loan, reduction payment on an existing mortgage and, if applicable, arrears in strata fees related to the mortgaged property, are also allowed.
Individuals can also withdraw if they are paying off an existing mortgage and, if applicable, arrears in strata fees related to the mortgaged property.
How do you access your funds?
Individuals who wish to withdraw from their pension plan will need to complete a form and file the required documentation with their pension plan administrator. The required forms will be available from their pension plan and can also be found here.
What documents will be required?
When applying to make a withdrawal, an applicant must provide evidence that he/she is Caymanian and, in some cases, that he/she has legal title to the dwelling unit.
The land register is required in the case of withdrawal for reduction payment or to pay off an existing mortgage on a dwelling unit and, if applicable, arrears in strata fees related to the mortgaged property.
Each applicant must also provide a letter from a financial institution and in cases where strata fees are being paid, a strata corporation addressed to the applicant.
If the applicant has previously withdrawn mandatory contributions from a pension plan for a payment on property they must provide evidence that they have been compliant in repaying what was previously taken.
The declaration on the form will also have to be signed by a witness.
Do I have to repay the funds?
By law, withdrawals made from the pension fund will have to be repaid.
Applicants will be required to repay an additional 3% contribution into their pension plan plus the legally required 5% contribution.
Those who have previously made withdrawals were required to pay back what they took at a rate of 1%. Should they make a further withdrawal it is understood that the repayment will be bumped to 3%, and again this would be in addition to the required 5% contribution.
How soon will I receive my payment?
Under the new amendments, pension plan administrators have up to 60 days to make disbursements.
The DLP, in response to Cayman Compass queries on withdrawals, said it is still in the early stages of the application process so statistics are not yet available on how many applications have been received.
At this time, DLP said it is in the implementation stage of the amended law with both the public and the pension plan administrators still learning their way around it.
“Accordingly, any complaints have largely been around the process. These have been addressed through education and information. Meetings have now been held with all pension plan administrators to explain the new Amendment and provide guidance on its requirements,” the DLP said.
Anyone with queries or concerns can email the department at [email protected].
Related Videos
