Gov't runs out of time on pension reform

Sweeping changes to the Cayman Islands National Pensions Law that have been in discussion for nearly a decade will have to delay even longer, Cayman Islands Employment Minister Rolston Anglin has said.  

Mr. Anglin confirmed Friday in the Legislative Assembly that while work on the bill was practically complete, the interim government would not be bringing it before the House prior to 26 March, when the current assembly will be dissolved ahead of the 22 May general election.  

“An updated version of the new National Pensions Bill will shortly be finalised,” Mr. Anglin said. “I am convinced that the changes proposed in the legislation are critical to protect and educate pension plan members … and to modernise our pension regime. 

“It will be available for consideration following the May general election,” he added.  

The proposed legislation would alter in many significant ways the existing National Pensions Law, which regulates private sector pension plans, including raising the minimum age at which pension entitlements can be collected from 60 to 65 years. The National Pensions Bill 2012 is the first major revision to the National Pensions Law, which was created in 1998.  

The bill seeks to eliminate the National Pensions Office and the board that oversees that office. In exchange, it has created a new government Department of Labour and Pensions and installed the Cayman Islands Monetary Authority as the regulator for the private sector pension plans.  

According to the Cayman Islands Complaints Commissioner’s Office, there are nearly 700 local companies that are in some stage of delinquency with regard to making legally required pension payments.  

Mr. Anglin said most of those administrative moves have already been effected. However, key questions such as whether companies would still have to make 5 per cent of salary contributions on behalf of expatriate employees’ retirement plans won’t be resolved until lawmakers figure out what they’re doing with the bill.  

Right now, private sector retirement plans are required to obtain a 5 per cent of salary contribution from the worker and an additional 5 per cent contribution from that workers’ employer. Under the original revised proposal, pension contributions for non-Caymanian workers would become voluntary, though companies would still be required to make those contributions for Caymanians.  

If the law was changed in such a way, the question of what would happen to the contributions already made by non-Caymanian workers who were then excluded from it would have to be resolved.  

Minister Anglin has said he believes contributions should remain in the fund unless the employee was leaving in the Cayman Islands. In that case, the normal rules for reclaiming pension contributions within a two-year time frame should be followed.  

“[Early withdrawals] is certainly not a policy that I would support,” Mr. Anglin said.  

Private sector pension plan providers have already expressed concerns about the expat workers’ “optional” measure. In August, the Cayman Islands’ two largest nonprofit private sector employee pension plans said that the potential elimination of work permit holders’ contributions to those funds could have wide-ranging impacts that will affect the retirement savings of Caymanians for both the short and long term.  

“Immediately most, if not all plans, would regress from growing through contributions, to shrinking, as monthly contributions suffer substantial reductions due to the shut off of expatriate contributions,” according to a statement issued on behalf of Silver Thatch Pensions board deputy chairman Charles Farrington. Moreover, the uncertainty of whether work permit holders’ contributions could be withdrawn from the investment funds, if they are no longer required to participate, is causing the pension plans some consternation.  

“Clearly, our members’ assets and the plans assets’ would drop [if that occurred],” read a statement from the Chamber of Commerce pension plan board of trustees.