Pension holiday coming

| 01/03/2010

Cayman Islands News, Grand Cayman headline news, Cayman Pension holiday(CNS): The government’s plan to offer a voluntary break for employees and employers from the mandatory obligation to pay pensions will soon come into effect. The minister with responsibility for labour, Rolston Anglin, opened the debate on the amendment to the bill on Friday afternoon. Once law, the change will allow Caymanian employees and their employers a 12-month holiday from making contributions and a two-year break for non-Caymanians or work permit holders. The aim is to offer people some economic relief and hopefully inject some cash into Cayman’s struggling domestic economy.

Anglin explained to the Legislative Assembly (26 February) that the break would be voluntary and employees with contracts that include pension benefits cannot be forced to take advantage of the break. Employers will have to show their staff have signed an agreement. Given the economic situation and the fact that employees as well as employers are obligated to make the payments, government believed a considerable number of people would still take up the offer.

The minister also emphasised that those employers who are delinquent in their payments must continue to make those contributions and they will not get a holiday from their obligations. The minister said, however, this would give an opportunity to many employers to catch up with their legal obligation to pay into funds.

The latest report from the National Pensions Board 2007/08 revealed that as of mid-June 2009 when the report was being composed, the number of non-compliant employers was far more than the 481 cases revealed by the statistics given to them as pension firms were not up to date on their statistics. Moreover, the sums owed by employers were considerable — in one case an employer owed the fund $600,000 of its workers money.

Anglin said that these employers would still be obligated to continue paying into their employee pensions schemes but the employees would be exempt should they agree.

Explaining the difference between the ex-pat holiday and the Caymanian holiday, Anglin pointed out that in most cases government knows that Caymanian workers will become pensioners in this jurisdiction. Therefore, if the holiday period for local workers became too great, future pensioners may not have enough to draw down from their funds to live on and place a burden on future CI governments. However, in the case of ex-pats, most of them would not become pensioners in the Cayman Islands so government could risk a longer holiday for those workers. He also said key employees and other people on work permits that had applied for PR, etc, would also get access to the two-year break.

He said this would not make foreign workers any more attractive than Caymanians as they would not be cheaper because the difference in cost in the second year for a foreign worker would still be offset by how much employers had to pay for work permits.

The minister said he believed there would be a considerable uptake on the voluntary provision for employees as there had been a lot of support for the idea from the community and pressure from small business for some help. He emphasised the fact that the decision had to be voluntary since, if an employee signed a contract that included pension benefits, then that contract was binding. However, with the consent of the employee, who would also save money, Anglin hoped it would offer relief for both employers and employees and help boost the domestic economy.

“This measure is to try and put people in a position to have more money in their pockets and should result in a general easing of pressure,” the minister stated.  With no direct taxation in the Cayman Islands, Anglin pointed out that government did not have many tools to manipulate the economic pressure on its people in the same way other governments did and this offered a way to give the people a small economic break.

“Given the economic hardship at the moment, people have been asking for some form of relief,” Anglin told the LA. “We don’t have an income tax that we can use to manipulate the economy … we needed to find a mechanism by which we could help and we will see if a change in this law will have the desired effect.”

He also acknowledged that there would be some negative impact on fund growth in the long term, but for those with considerable time to pay into the funds, there would be time to recover.

According to the NPB report of the many difficulties facing the pension system, the funds have also been performing poorly during the economic crisis. This is an issue for many employees who resent paying into funds which are declining. Moreover the NPB has also revealed that there are still some pension providers taking contributions which are unregulated and some that have already encountered severe financial difficulties and in some cases have gone into liquidation.

Having presented the bill to the House, the debate will take place on Monday 1 March before the law is passed by government. Anglin confirmed that once the bill is assented, the pension holiday will take immediate effect for those employers who are up to date with their existing pension contributions for employees and where employees have signed their agreement.

Category: Headline News

Comments (36)

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  1. Anonymous says:

    What about the consaltants report which was done a few years ago?

    Reinstate from Holiday – who will be monitoring this?

    What about the employers how have been in arrears for over 3yrs?

  2. Anonymous says:

    I am a young Caymanian and I WILL NOT be taking this up at all. If these people would use this extra money monthly to help cover their bills and stop hopping on the flights to Miami or Jamaica every Holiday then we would not need this Pension holiday!!! I am against it. 100%

  3. Anonymous says:

    When are we going to see some discussion/resolution over early cashing of our money if there is a holiday on contributions.

    Fairness does not seem to enter the discussion, if we cannot have confidence in the local pension being regular any more and is therefore not an avenue of saving anymore then we should be able to withdraw all fund  and place somewhere that is.

    I am amazed at the discussion on the number of known employers NOT contributing money that would otherwise be considered to have been stolen.  Blatant.  Where is the law for the little people.

     

  4. Buzzed says:

    What is the difference between a pension holiday and taxes?? Less money in my pocket.

    Can I get my money out of the fund, please?? That would certainly help me to stimulate the economy.  I could buy a new car or use it as a deposit towards my house. 

     

  5. Anonymous says:

    What I really want to know if whether or not the Government is still lying to civil servants by telling them that they were receiving their pensions since June 2009 and it wasn’t true. It was just showing up on their pay slips and not being paid into pensions.

    That’s a fact. Sick of the constant lies!

  6. Annoymous says:

    I was sick and tired of my fund loosing money. 

    This is a very prejudiciallaw the Pensions Law and needs some serious revisting and revamping.

    The Administrators charge youtheir normal fees regardless if they make money or not.  Also tell me why must my fund be invested?  I don’t see the point?  If I am loosing more than keeping it in a locked interest bearing account they why would I want to invest it so carelessly the way these Administrators are doing?

    I am glad for the holiday, and it should be indefinately for suspended for Non Caymanian employees.  I do not see the point of paying pensions for Non Caymanians that is just a scheme for the Pension Administrators to milk the employer of more money for them to loose and collect fees from more clients.  Also don’t think for one minute that employers are basing salaries on this monthly contribution.  Am I the only one who sees this? Or is the rest of us wearing ‘rose coloured glasses’?

    Do not suspend it for Caymanians at all, but certainly for all Non Caymanians.  If a Non Caymanian employee wants to contribute then let them do so on their own merit, but do not require the employer to do so going forward.  Otherwise it makes no sense.

     

     

  7. peter milburn says:

    Bad Idea Boys.More Knee jerk reactions once again.

    Now the Lord has said unto Moses "Bring me Rolston as we need to have a very serious talk about these pension problems."

  8. Anonymous says:

    http://www.compasscayman.com/caycompass/2010/02/26/Pension-report-slams-legal-system/

    We have so many existing issues with our Pension system why compound it with a holiday? I am not sure why we have the expertise and the resources and yet still we glaringly go against sound advice and proceed with nonsense such as this? When this was first mentioned didnt we have NPB, Superintendent of Pensions, ex Chairmans etc advising that this was not a wise move?? We can barely prosecute employers who are breaking the law now as is, any legislation being passed should be stiffening penalties and providing the NPB with some teeth instead of this reckless abandon of good common sense.

    My question is how many of these plan Administrators are still in trouble and shouldn’t the public be aware of instances such as this? What’s the point of being responsible citizens only to find out that you are being shafted in the long run?

    Please note these reports are 4 yrs old can you imagine what the situation is like now???? It seems to be absolute chaos to me and no one has a true handle on this increasingly alarming problem!!!!

     

    "Both reports, one from 2006/07, which had its release delayed for about two years, indicate the National Pensions Board members were “extremely disappointed” at the progress of prosecutions against companies that failed to meet pension obligations. 

    Also of concern, the pension board report for the government’s 2007/08 fiscal year indicates that one of the pension plans was in a vulnerable financial position. But details of that weren’t made public right away, partly because the 2007/08 pension board report wasn’t released until eight months after it was completed.

    Both reports by the pensions board said the progress of criminal cases involving alleged pension violations were “excruciatingly slow”.

    During 2006/07, the pensions board could not calculate a total amount of pension arrears owed by delinquent companies. However, it was estimated in the report that at least $2 million was owed in “top priority cases” alone.

    In the 2006/07, two multi-employer pension plans were threatened to have their registrations revoked if they did not meet legal requirements.

  9. Anonymous says:

    no, no, no. it may help now, but when it comes time to retire and we have no money, this will be a major factor.

    You may not save your way out of a recession but neither do you spend your way to a wealthy old age.

  10. Anonymous says:

    Bring govrnment into line with the rest of the statutory bodies that have to pay half to their pension but don’t get a pay rise when government workers do.

    Stautoury bodies are a way of government palming off problems but still meddling in day to day affairs

  11. Seriously? says:

    I love it – so effectively employees will be taking a salary hit of 5%!!  If an employee wishes to pay into a pension plan (although with the returns they are getting who on earth would want to) it should be MANDATORY for the employer to contribute.

    Sticking on pensions – why is it that government employees, on leaving the Island, can get their pension monies immediately whereas non-government expats have to wait two years??

  12. Macman says:

    And what will happen to all the pension plans during this "holiday period"?

    I’m not sure but don’t they get their income from people paying their pensions. If so where are they going to get their income if no one is paying their pension?

    Are they going to take it out of the pensions already paid and so decrease the value of the pension funds

    even more?

     

    • TheTruth says:

      I’m not sure but don’t they get their income from people paying their pensions

      Only in the Bernie Madoff run pension, dear

      That’s a ponzie scheme

      • Anonymous says:

        Unfortunately that is how it works in reality idiot.

         

      • Anonymous says:

        And the people who work for the pension funds where do they get their income dear?

         

        Or hadn’t you thought of that dear ?

         

  13. Anonymous says:

    when we start paying income tax the fault will lie squarely on the shoulders of the Civil Servants and the weak politicians who can’t see past their next election. Mark my words, we will have income taxes by next election IF there is no change in the civil service.

  14. Anonymous says:

    What will the employees who work for the various insurance companies that deal with the pensions do for this year? Will they have a year paid leave? Or will they be joining the unemployed and have to fight for their jobs when the companies start paying pensions again?hz

  15. crazygirl says:

    I know that this do not have anything to do with the above topic but CNS can you tell me if anyone reported feeling a tremour at about 11:00am and 11:10am?

    I’m in Industrial Park and the ground shook.

  16. The Truth is Out There says:

    Why would any employee in the Cayman Islands agree to reduced benefits?  This makes no sense to me. 

  17. Anonymous says:

    Good Move. People want their full pay and not risk it in uncertain investment plans. This will also be relief for small businesses.

  18. Anonymous says:

    A couple of comments on this article:

    "According to the NPB report of the many difficulties facing the pension system, the funds have also been performing poorly during the economic crisis. This is an issue for many employees who resent paying into funds which are declining."

    The Plan I’m in recovered quite well since the downfall in the markets in the Fall of 2008. The Pension Laws require that pension funds be invested at least 40% in equities so there is always going to be some exposure to the equity markets.  You take the good with the bad and hope that in the long term your average returns have been good.  Also, have you ever heard of dollar cost averaging in a down market?  The NPB has no clue. 

    "Moreover the NPB has also revealed that there are still some pension providers taking contributions which are unregulated and some that have already encountered severe financial difficulties and in some cases have gone into liquidation."

    If the NPB actually shut down these "unregulated" pension providers then this wouldn’t be an issue.  They are simply not doing their job as regulators of the National Pensions Laws.  These plans are not going to close on their own when they are earning fees.  The NPB cannot complain about this issue when they are the ones with the power to shut them down.

  19. CSI says:

    Sorry Rolston – still a bad idea.  Here are likely scenarios:

    1. Big, well managed companies like multinational law firms and accounting firms will have contracts entitling employees to pensions and the contracts will overrided the proposed legislation (they will just change from mandatory to voluntary pensions).  These companies are well run and have budgeted properly for their pension obligations and in all likelihood will continue to make the pension payments on behalf of their employees.  Some individual employees may choose to voluntarily suspend their contributions.

    2. Smaller companies that are making money and doing well, and are up to date on pension contributions would gain a lot of employee support by continuing to make payments.  If the company is functioning well, there’s little incentive for the company to suspend pension payments.  As above, some idividuals may choose to voluntarily suspend their contributions.

    3. Smaller businesses that are doing what they can to meet their pension obligations but are struggling to make payments despite best efforts.  These companies are on the "delinquent employers" list and therefore do not qualify for suspension of pension payments.  However, their employees are entitled to suspend their own portion.  What does this mean to the employer?  Despite being unable to meet current obligations, now they will be expected to pay the additional 5% in cash to the employee who has requested voluntary suspension.  The net effect could could be that they fall further into arrears.  At the very least, they gain no ground and the pension holiday has done nothing to assist these well-meaning employers.

    4. Smaller businesses with unscrupulous/fraudulent/malicious owners (there are plenty in this category).  Many employers in this category are finding countless ways to rob employees of pensions they are entitled to.  Those that are on the delinquent list are in the same position as category 3 above.  The difference is, many of these employers are deducting the 5% from the employees salary with no intention of ever contributing it to a pension fund.  The new legislation doesn’t do anything to address these employers – they will continue to ignore their obligations and get further in arrears.  These employers are stealing from their employees.  It’s theft, and should be punished as such.  Other tactics that unscrupulous employers are using:  A small business has 10 employees.  They go to a pension provider and register 4 employees, telling the pension administrator that they only have 4 employees.  They make regular payments every month for the 4 employees and are therefore "up to date" on pension payments.  The 6remaining employees never get a pension payment made on their behalf (despite a 5% deduction from their salary), and it goes undetected because the administrator has no means to monitor employees who are never enrolled.  This "up to date" employer will be eligible for the pension holiday – do you think they will take advantage?  How about the employers that tell employees (especially those on permits) – you can keep your job if you "agree" to "voluntarily" suspend your pension.  Do you think there’s any opportunity for intimidation here?

    I just listened to Mr. Anglin say on the radio that, "…we looked at the long term in making this decision…"  What?  If this is true, then how could the decision possibly be justified.  Never has there been a clearer case of short term gain, long term loss.  Even the short term gain is likely to be minimal, yet the long term losses are a virtual certainty.

    And what about when the holiday is over?  Do you think it will be easy to get employers to start paying again?

    When this hairbrained scheme was first mentioned last summer, Rolston clearly didn’t support it.  Then Mr. Premier made one of his unilateral proclamations that a pension holiday was coming and Rolston had to start back-pedalling and trying to justify a decision that had apparently been made for him.  Then they said it was going to be a short term holiday (I believe they said 6 to 9 months, but I stand to be corrected if I have my facts wrong).  Now it seems that it’s not so short term – a year for Caymanians, 2 years for expats. 

    Try and justify it if you must, but this will always be a bad idea. 

    • Shock and Awe says:

      "They go to a pension provider and register 4 employees, telling the pension administrator that they only have 4 employees.  They make regular payments every month for the 4 employees and are therefore "up to date" on pension payments.  The 6 remaining employees never get a pension payment made on their behalf (despite a 5% deduction from their salary), and it goes undetected because the administrator has no means to monitor employees who are never enrolled."  Ain’t that peculiar.

      And those employees don’t get a pension statement.  Ain’t that peculiar.

      But you got it precisely. There IS no way for a Pension Administrator to know HOW many employees a company has whose wages have been deducted 5% each paycheck.  It’s up to the employer to notify them.  Ain’t that peculiar. They should have been prosecuted for theft!  And never were. Ain’t that peculiar. 

      It isn’t peculiar some employers picked up on this yawning gap of relevant information.  And took advantage of it.

      Who devised this system?  A bonehead? 

      Now these very same employers, still seemingly in compliance, who have been taking deductions and not submitting them, are being offered.  What’s it called?  a "holiday"?  Ain’t that peculiar. Who again is this holiday intended for?

      Correction this isn’t a holiday.  It’s a C’mon Guys Pay the Contributions and Get Out of Jail Free Card.

       

       

  20. Anonymous says:

     Has anyone in government ever explained WHY civil servants should not pay at least one half of their pension contribution?  

    • Know-more-than-you says:

      Please tell me which civil servants don’t pay pensions… my mom and boyfriend are civil servants and THEY HAVE TO PAY 5% EACH MONTH!

      There are these things called "FACTS"… you should get some!

      • A little more than you know... says:

        Here are the facts:

        There are two pension plans within the Civil Service. 

        One is called a Defined Benefit Plan.

        One is called a Defined Contribution Plan.

        In each one the employer contributes 6% and the employee contributes 6%.

        But

        Both are non-contributory plans. 

        What does that mean?  I’ll explain.

        Both are fully funded by the employer (that’s the Government). With a salary allowance for the employee’s portion (that’s the Civil Servant).

        So.

         It’s true they have a deduction for pensions. 

        But it’s paid for.

      • Anonymous says:

        "Know-more-than-you"  you know full well that the net effect is zero!!!! Their gross pay is increased by 5% and with the 5% pension deduction it has ZERO effect on their take home pay.

        +5%

        -5%

        ——

        0%

        ===

        So at the end of the day Govt NOT your boyfriend or mother is paying for the cost of their pension!!!

      • Anonymous says:

        As the two previous responses to your post have already pointed out – yoru mom and boyfriend are getting a free ride on their (non-contributory) pensions.  Their contributions are paid by the government… or should I say us, the people/taxpayers.  As if it aint bad enough having no choice under the law but to pay our own pensions, we also have to foot the bill for the likes of your boyfriend and mom’s pensions too – tell me is that really fair?

         

      • Anonymous says:

        You have some like me that don’t…. Not every pays and that is a FACT

      • NOW they tell me! says:

        It’s true hon.  They also get free health insurance and I believe dental care subsidy.

        Maybe your mom and your boyfriend have been holding out you?  Get that filling now.

  21. Anonymous says:

    Thank you Rollie!

    • Anonymous says:

      thanks for what?

      don’t you undrestand what this is doing?

      poor government policy

      they have no idea how they are destroying this island, and people like you are helping them,  thanks for nothing

  22. Anonymous says:

    Short term gain long term PAIN!!!!

    We really need to start thinking through these knee jerk reactions and come up with real solutions. The bottom line is we need to reduce government spending period, not defer or delay but REDUCE. Tough decisions need to be made for the betterment of the COUNTRY and not for political parties!!!

    • Anonymous says:

      This is just another band-aid treatment with no real solution for our problems.

  23. Anonymous says:

    But of course there will be no such "holiday" for the politicians’  generous non contributory plans will there?

    • Joe Average says:

      Good point.  It will be interesting to note if politicians take advantage of this kind offer.  There is no mention of that.  Why?  Lead by example.

      However, many employees may just take advantage of this "holiday".  As it’s called. For the very simple reason they have no idea where their money has gone to date. 

      According to law It was deducted from wages.. but.. where did it go? 

      Why hasn’t it been pursued?

      For this plan to work properly at all, and to be fair to employees, it must be made abundantly clear the arrears many employers have created by not forwarding employee contributions will be pursued with MUCH more effort than has been shown.

      One or two have been pursued by the court. There are over 600 cases outstanding.

      I can see those particular employers considering this proposal with glee.  "Two years?  Their permits will be up!  They’ll be gone!!"