Pensions holiday starts Monday

| 23/04/2010

Cayman Islands News, Grand Cayman Island business news(CNS): Private sector employers, employees, and self-employed individuals now have the option of not paying into their pension fund for a temporary period starting Monday, when amendments to the National Pensions Law take effect. The hiatus for payments must be agreed in writing by both employer and employee and all payments must be up to date for them to participate. The amendments allow a temporary one-year suspension of pension contributionsfor Caymanians and a temporary two-year suspension period for non-Caymanians.

In a government release Minister with responsibility for pensions, Rolston Anglin explained, “In the current economic climate, pension contributions place a considerable financial burden on employers, employees and self-employed persons. With some businesses facing closure, this relief might enable them to survive these tough economic times.”

To participate in the suspension Minister Anglin explained that businesses must be in compliance with the National Pensions Law. “Any employer participating in the suspension term must be up-to-date with their contributions or have made arrangements for the payment of any arrears before participation can begin,” he said. “This is to avoid compounding any existing non-compliance with the National Pensions Law.”

Acting Superintendent of Pensions Amy Wolliston noted that while participation is voluntary it is not automatic. “Persons who wish to continue making contributions throughout the one- or two-year term may continue to do so,” she said, “But employers and employees must apply to participate.”

She explained that both parties must first agree to the suspension, then sign a written agreement that replaces employment-contract pension obligations. Once those steps are completed a formal application must be made to the pension plan adminstrator, which must approve the suspension before companies can cease making contributions.

Another participatory condition, she noted, is that pension plan membership must be maintained. That is, all employers and employees – regardless of when they are employed – must be members of a registered pension plan. In fact, businesses established during the pension holiday period are also obligated to establish a pension plan and ensure that their employees are members.

Similarly, opportunities to suspend pension payments are extended to self-employed persons. However the same conditions apply. Self-employed individuals must formally apply to their pension plan administrator before suspending payments, and must maintain their membership within a pension plan.

For more information, refer to the National Pensions Law (2010 Revision). A copy is available on the Cayman Islands Government web portal www.gov.ky. Look for it under the features section.
 

Category: Business

Comments (24)

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  1. tc says:

    I think this is a waste of time because it only builds up people hopes that they can get a break from pension. I found that once the Employer not going for it the employee doesn’t have any other choice.  So I want to say that Rolston Anglin wasted his time putting through a law that is of no benefit!

  2. Anonymous says:

    Thank goodness the firm I work for is not supporting a pension holiday and is recommending to us that we not request it either.  They have also given us good examples of why it would be a follish thing to do, whether we are young or older, Caymanian or expat.

    • Anonymous says:

      And what might those reasons be?  As many of our expat employees receive gov’t support after retirement they are happy to have the extra disposable income in their pockets today.  What might dissuade them?

  3. Anonymous says:

    As Far as I am concerned, we should not be subjected to this pension plan in the first place. As expat, we only have a limited time here, so therefore we will have to retire back in our own country.  Let that burden be on our Government back home where we are from.  For far too long now we have being abuse by these delinquent employers who rob us of our hard earn cash and benefits, and guess what nothing (serious) as been done about it. Back where I am from pensions is optional and flexible, whereby we decide if we would like to have one and choose to take it whenever we want it, and with than in place retirees are no worse off there when being compare to other countries who have strong pension plan in place.

    • Anonymous says:

       To "As far as I am concerned": It sounds like things are pretty good where you come from. Pensions are optional, government is smart, cash is easier to earn and you are not abused…it sounds like dreamland!  What are you doing in this part of the world working so hard for your cash?

      • Err . . . says:

        A subtle variation on the "why don’t you go home" or "why did you come here" gambit.

    • Anonymous says:

      You are correct!!! Pension should be optional not forced upon you!!!

  4. Shock and Awe says:

    As well as addressing the hardship employers find themselves in, it would be advantageous first to address the hardship employees face who have had contributions deducted but never submitted. 

    • Anonymous says:

      The Pension holiday was also to allow delinquent employers to catch up on their pension.  This should be enforced if they don’t have to pay pension after 26th April they should be allowed to commit to catching up on their outstanding contributions.

      On another note, the law may have been passed it still has to be approved by the administrator.  On what grounds will they have to either approve or not approve.  What happens for some reason they don’t approve it even if you are all caught up and not delinquent.

      Pension are losing money, if they were invested here in the Cayam Islands I don’t think there would be a problem.  But so many people at the end of their Permit go and claim their pensions and when receiving their statements they have lost so much money!!!

      • Read the law dude says:

        read the law, you cannot participate unless your pension contributions are up to date.  An employer/ee in arrears cannot participate. This is under section 5C 3 (B) so no the pension holiday is not to allow delinquents to catch up.

        There is a golden rule of reasonability in law.  Theadministrator cannot refuse the application if the employer/ee have agreed in writing and submit to the legal requirements.  The administrator cannot simply refuse because he doesnt like the look of your face for example.  There exists in the new law under section 5E a right to appeal the administrators decision to the Superintendent.

         

        For the record, under section 5C (2) you can opt to suspend pension contributions for a portion of time during the pension holiday.  SO, for example I am Caymanian and wish to have a pension holiday (for me I get 1 year) but only want to suspend for 4 months.  If my employer agrees we can contract out of making pension payments for 4 months out of that year!!

  5. caymanian says:

     What warranty do we have that the companies running the Pension Plan will not collapse as a result of so many people taking the break?  How are they going to afford to pay all the administration with no money coming in?For most young expats that are here for a shorter period of time, it makes sense not to put their money into a plan as it is a pain trying to get it back. Might as well keep it and do what ever they see fit. But I have to say that I fear what the future might bring if these Pension Plan Providers can not stay in business after two years, what is going to happen with all the monies owed? Who will take the responsibility to make them pay if they go bankrupt?

    • Anonymous says:

      No! not everyone will be taking advantage of this plan, base on what i have heard as the "talk of the town". Furthermore as with any other business whenever revenue drops, expenses as to be cut, whether its a pay reduction or lay-offs, just as all private company as been doing now. Whenever the economy is good all is happy. Whenever there is a recession we all have to tighten the belt here and there.

       

  6. Anonymous says:

    is there anybody outside the cabinet that thinks this is a good idea?

    welcome to wonderland….another day in cayman…..

    • CSI says:

      Yes – sleezy employers who will look for an opportunity to exploit their employees.  It will be mostly low income earners from other countries, but I’ve already heard of a case involving a highly qualified professional whose employer told all employees 6 weeks ago that they were all taking the pension holiday.

      The sleeziest of the sleezy are among the 600+ currently delinquent employers.  They’ve already decided that it’s easier to continue not paying anything and stealing the employees’ 5% deduction with no consequences.  Saves paperwork and doesn’t require any pesky legal agreements with employees.  Apparently outright blatant transparent theft is OK in Cayman.

  7. Anonymous says:

    What’s the incentive for the emloyees that decided to take the pension holiday will they get the monies that are in the pension plan and start a new plan after the holiday? if the answer is no, then why would I want to take a pension holiday when there is clearly nothing in it for me.  I know of absolutely anyone who have lost more in pension than their contribution, oh I forgot maybe with the exception of  those who are self employed.  It would be a good thing for those that are self employed to take the pension holiday and contribute that same amount in a saving account at the Credit Union for the 2 years and see what their gains are compared to the pension provider. How about that?

  8. Scrooge McDuck says:

    I very much like the idea of having pension payments up-to-date as a prerequisite.  The fear amongst workers was that the 670 companies now in arrears would use this period of time to "disappear" themselves or the employees involved. Which of course has never happened. And there has never been any coercion and no one has taken advantage of the pension system to reduce workers’ wages.   Now, it will be up to pension administrators and possibly the NPO to inform these employees where their money is.  Or isn’t.  Before their employer can sign them up to this latest plan.

    And if employees are smart they won’t touch it until they are given absolute proof, in writing.

  9. CSI says:

    Employees – don’t be bullied by your bosses.  In order to participate in this it has to be mutually agreed by employee and employer.  Employees can’t be forced to accept this ridiculous reduction in pay.  It was a stupid idea when it was first proposed, and it’s even worse now.  Anybody who thinks there will be any tangible benefit to individuals or to the economy as a whole is just as delusional as Big Mac himself.

  10. Anonymous says:

    Absolutely no point in stopping is there? We still have to wait 2 years to get it back when we leave so might as well make the most of the employers 5% contribution.

    If the government wanted to incentivise people to stop paying into the pensions they should allow those expats with over 5k to withdraw funds immediately as long as they agree to suspend contributions. Those that continue to contribute will have to wait 2 years to withdraw.

    This is the only way the scheme will lift the burden on employers as anybody that stops paying in otherwise is daft, to be fair.

    • Anonymous says:

      I agree no point in stopping especially when you consider that not only do you have to wait 2 years, not to withdraw your money, but to apply for permission to withdraw your money.  It takes at minimum 3 months (usually longer) before permission is granted if your application is approved as submitted.  To apply for permission you have to fill out forms and supply a myriad of documentation.  Then there is the wait time after that for you to actually have your money returned once permission is granted.

      • Anonymous says:

        I am an expat who has worked in numerous jurisdictions and in all cases except Cayman I have never been able nor do I have access to getting funds from a mandatory scheme whether NIS or social security. Even voluntary schemes such as 401k or an IRA will give you access to funds but with massive tax and penalty consequences. I know, I’ve been there. Paperwork or no paperwork, you have access to 100% funds at some point before retirement. Seems fair to me. 

        • Shock and Awe says:

          22:29, You’re correct to a point.  But the fear is, and at this stage it is well justified, will the funds be there? 

          The pension system was a good one.  But sadly it relied on employers to supply all the information.

          Given the dismal record of pension providers relying on that information to collect contributions.  Also the ineffectiveness of government officials in ensuring employers were compliant with the NPL.   Adding to that, the number of… outstanding cases…. where employers have been found not to be (670, but at one time greater) and the slow and painful process in dealing with them.  We may as well add the horrendous state of government accounts in general.

          Regardless of the perceived benefits between this system and an IRA, and given all of the above, would you finish your employment and assume in two years your funds will available or can at least be found?

           

        • Anonymous says:

          You are correct in your statements about being taxed if trying to draw pensions from most other jurisdictions but the big issue you are missing is that in those countries you would normally be taxed on earnings and receive an allowance on your pension contributions and so rightfully would be taxed on them if drawn before retirement.

          Here in Cayman where there are no direct taxes on earnings anyway you are not receiving any extra benefit on investing these funds in a pension. You don’t save on taxes as you wouldn’t have paid them anyway, so your point is completely irrelevant.

           

  11. Anonymous says:

    Please consider the long term implications on your retirement income if you decide to take this Pension break.  It will have a huge impact on your retirement and why give up your employer’s 5% contribution.  Do not be forced to sign the application or written agreement – Employees you do have a choice in this.  Remember it is your nest egg, not your employers!

    • Anon says:

      At our company, our FC explained to us the pros and cons of taking the pension holiday or just by-passing it altogether and just continuing as normal. I know most of us have decided to not take the pension holiday. I don’t think it’s a benefit to me, my family and our future in the long run and my company feels the same. However they have stated that if we won’t to take the pension holiday we are free to do so. I as a young Caymanian chose not to take the pension holiday because I know I will not save the money so might as well leave it where it is.