Pension reports kept in dark

An evaluation of the Cayman Islands’ public sector pension plans that is nearly four years old has still not been made public.

The actuarial report dated 1 January, 2008, was completed in March 2009, according to records from the Public Service Pensions Board.

In addition, auditor’s reports have revealed the pensions board tentatively agreed on an “accelerated” evaluation of the pension system to be completed in January 2010 “to determine the impact of the financial crisis on the adequacy of the funding” for the various pension plans. That evaluation, if it was completed, has also not been released.

Absent from government ownership agreements in the current year’s budget was information available on net assets, total liabilities or net worth of the Public Service Pensions system. That information had previously been provided up through the 2010/11 budget year.

There was no explanation provided in the records as to why the figures had been left out of the government’s ownership agreement documents for 2011/12.

An actuarial report on the public service pensions system is typically done every three years and is basically a review of the financial state of the system – which serves as the retirement fund for Cayman Islands civil servants, judges, and lawmakers.

The evaluation determines how much unfunded liability – potential future debts not covered by current assets – a pension fund contains. Those liabilities are generally estimated over a rolling 20 to 30 year period.

There are two types of retirement accounts for civil servants under the public service pensions plan; a defined benefit account, which provides monthly pension payments for retired government workers; and a defined contribution account, which provides a yearly lump sum payment to retirees, with the potential of a one-time payment of up to 25 per cent value of the account.

The unfunded liability figures apply only to the defined benefit accounts and were estimated in the most recent Cayman Islands government budget at about $188 million.

However, that figure is derived from a 2005 actuarial report and has never been changed since the 2008 actuarial report was completed.

In a public bond offering from 2009, the Cayman Islands government put its public sector pension unfunded liability at US$248 million (approximately CI$204 million). That was based on the 2008 actuarial report the auditor general’s office has not seen.

A more recent estimate from mid-2009, put the unfunded liability figure at US$325 (CI$266 million).

A higher projected liability generally means that government would have to pay more each month for each civil servant’s retirement fund to ensure future payments can be made, according to Auditor General Alastair Swarbrick.

A lower projected liability could serve to lower those payments.

Public service pension liability figures also impact the overall net worth of the Cayman Islands government.

Net worth figures for Cayman’s government were projected to end the current fiscal year on 30 June, 2012 at CI$489 million.

Cayman’s central government debt was expected to end the year at just under $600 million and total public sector debt was projected to end the budget year at $736 million.