$10m taken from pension plans to fund homes

| 05/09/2014

(CNS): More than CI$10 million has been withdrawn from private sector pension schemes in Cayman by local people to use to put a roof over their heads. So far more than 500 Caymanians have been forced to raid their future retirement income so that they can afford to buy or build a home. The pensions law was changed in 2011 following a private members bill brought by former UDP back-bench MLAs Ellio Solomon and Dwayne Seymour. As a result, locals can now take as much as $35,000 from their pensions before they retire to buy land, build a house, make a down payment on one, or pay off a mortgage.

The National Pensions Office, which oversees the withdrawals, recently published the details of the cash that has been taken from the funds in-line with the strict criteria laid down by the law.

It revealed that between the end of 2011 when the scheme began and 30 June this year 523 people have applied to take money while four changed their minds, and 506 applications had been approved. The majority of applications, almost 300, were for contributions to a down-payment or deposit to buy a home, equating to more than CI$5.7 million taken from funds.

Over a hundred applicants wanted to pay off mortgages to the tune of more than $2.8 million, while more than 60 applicants used $1,1 million to contribute towards building a house. The remaining 40 applicants withdrew $620,000 to buy land.

Only Caymanians who do not currently own a property can take the cash from their pension if they have the funds already there and they are obligated to pay themoney back into the pension if the home it relates to is sold before they retire.

People who opt to take the cash are also required to increase the contribution they make to their pension following the withdrawal by 1% of their earnings. This means the minimum contribution they must make to their compulsory pension plan between themselves and their employers increases after they take the cash from 10% of their wages to 11% for ten years or until the amount taken out is covered until they retire.

Category: Local News

Comments (39)

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  1. charles says:

    ONE WORD STUPID!

    All the banks that gave these people mortages to build houses

    and buy land will have a big problems down the road, say another 5 or 6 years

    when these people cant afford to pay their mortgages any more, simple

    math, if you could not afford the down payment for the house or land on your own

    you could afford the mortgage, Let me simlify it even more. Example: lets say your dear dad

    left you CI$50,000 when he died, you could take that money and qualify for a $500,000 mortgage, but that does not mean you can afford the mortgage, when you figure utilities, insurance, water and upkeep, the majority of those who used their pension to get a mortagage

    cant afford it dumb!dumb! dumb!

    I know a friend of mine who got a mortgage at a bank on west bay road that was taken over from

    another bank, only only because of someone he knew in the banking section, HE DID NOT

    QUALIFY, BUT STILL GOT IT, EVEN A BRAND NEW CAR!! UNBELIEVABLE!!!

     

  2. anon says:

    Think of this in financial terms. Using the money to pay down a mortgage. Everyone knows that it is better to pay off debt before saving. The interest rates on mortgages are far greater than your expected returns especially those of the pensions on island. Eveninvesting in property will create better returns than pensions over the long term.

    • Anonymous says:

      I'm looking at taking $15,000.00 from my pension as I don't have the $49,000.00 the bank wants me to put down for a $240,000.00 property. I'm 30 years old and I've been working for chicken feed the past 11 years so my lil savings is not so bad. I'm grateful I have this alternative as to waiting another 6 years to save 15k and obtain my mortgage sooner rather than later. These banks are also ridiculous! The only thing left for me to give them is my p*****!!

      • Anonymous says:

        I hope its a far inland lot otherwise the insurance you'll be paying to keep that loan will be much more per year than the ($15,000/6) you're 'saving saving' by taking from your pension.

      • anon. says:

        You're what?

    • Anonymous says:

      Thinking of this in financial terms:

      Current interest rates on a mortgage: aprox 3.5%

      Return from Silver Thatch Pensions this year (July 1 2013 to June 30 2014):

      Aggressive Portfolio: 19.91%

      Growth Portfolio: 17.36%

      Balanced Portfolio: 13.67%

      Conservative Portfolio: 9.65%

       

    • anonympous. says:

      poor baby boomers and young people struggling to make it then have no pension when they need it. Never seen so much  organised r********** activity   Just llike crooked Jamaican politicians Cayman is gone to the dogs. Have they labeled it a reverse mortgage with a clear explanation or is this one of Alden's and PPM unscrupilous moves to try to fool us into believing they are helping when really they are screwing the people in the a**.tHIS HAS REGRETS ATTACHED,

      • Anonymous says:

        'Twas dear old Foolio that hatched this plan. You all remember Foolio doncha?

    • Anonymous says:

      I made 32% last yearon my investments. 

      • Anonymous says:

        at what risk? and how did your pension do against historic gains? for 32% returns, you must max out your credit cards and use the cash to invest with

    • Anonymous says:

      Now that you mentioned the interest rates. Does our monetary Authority regulate our banks here, as they do in the USA and the UK

  3. Anonymous says:

    More foolishnes.

    Does this mean the pension scheme will earn considerably less that it would have?

  4. Anonymous says:

    Not good, but far better than McKeeva taking $10 million from government coffers to "save" the mortgage of anyone willing to vote UDP.

  5. Anonymous says:

    This is ill advised. These people who could not afford their homes without raiding their pensions for a downpayment will very likel soon be subject to foreclosure. No home and less in the pension pot.

    Government would do well to look into some of these exhorbitant strata fees and stamp duty relief for all first time buyers.

    • Anonymous says:

      You can already pay zero stamp duty if you set your sights low enough and if you don't know why the strata fees are so high go along to the AGM or request a copy of the accounts, nothing to do with Government. Don't forget insurance is usually the biggest cost in strata's since Ivan, on a $200k property expect about $275 a month to be insurance costs, assuming you don't pay for an onsight property manager, or employ friends or family of the strata's exec comiittee….

      • Anonyanmous says:

        Strata a NO! don't buy into any strata unless it is managed properly.  This is one of the biggest cons of local developers.  If it is a duplex walk away from it, there should be a law in place that no duplex should be able to be sold. The government need to look into this and adapt the same laws that they have in Canada where individual can own half of a duplex and it does not have to be a strata.  People are being ripped off and if it continues this is going to be an international incident that will create problems for the real estate market in Cayman and no one wants that so Government need to stop the practice.

    • Anonymous says:

      Its there f@@ing momey. let us know when one of these lose their home. Stop assuming it will happen. You are probably a pension collector, why else should you give a damn about the poor?

  6. Anonymous says:

    Absolute disgrace! Please tell me how the government is going to pay pensions to all it's pensioners in the upcoming years.

    Can we see proof of where this money went?

    • Anonymous says:

      This wasn't government's money. It does not apply to the Government pension which government has to pay (leavign aside discussions of member contributions for now). It was the private pension plans. If you're private government doesn't cover you; after you retire your pensions/savings/family have to support you. Or you go on Social Services … oh, I see what you should have been saying.

  7. Anonymous says:

    The wisdom of Foolio!

    Imagine how much more damage he could have done had he still been around.

  8. Anonymous says:

    Finally my daughter was able to get her home.  Not everyone can afford the high down payment requirements so this is awesome.  I am happy that she now is a homeowner and not letting the pension administrators lose our hard earned money gambling in the stock market and taking huge fees on top of losing our money.  We now have the opportunity to pay off our house by the time we are old so that we are not a burden on society.  Well done Mr. Solomon.

  9. Anonymous says:

    Illegal discrimination on the basis of national origin.

    • Anonymous says:

      Well there is always the opportunity for you to go back home and see if your government will do the same for you.  When expats leave Cayman they take their pensions with them, depending on the amount, or stay away for 2 years and you get all of it.  Caymanians don't have that option so Cayman needs to keep this for Caymanians only.

      • Anonymous says:

        Yea,see what the big mouth has to say about that! Why are they taking their money out and the poor Caymanians cant use theirs for a deposit…f@@ing hypocrites.

    • Anonymous says:

      Oh God, I hope you are not a lawyer. For a start being a Caymanian is nothing to do with National Origin.

    • Anonymous says:

      No, it is not, but I doubt you would allow fact to interfere with your made up position.

  10. Anonymous says:

    So the rest of us have to pay to support these ill advised souls when they reach retirement age? They not getting a penny from me.

     

    • Anonymous says:

      I took 35k and bought a piece of land. Since I did that, I embarked on some business ventures that have allowed me to build. I don’t know who you are, but you seem like a real bag of laughs. By the way, I won’t need a stinking penny from your selfish rarse.
      You are not a clever person.

    • Just Sayin' says:

      When the time comes, and it will come, they better go knocking on Ellio’s door looking for that handout.

    • Anonymous says:

      You mighten get a penny of your own cash that you are forceably have to save. This whole way of setting up social security is farce. Your government has screwed you in the name of ignorance.

      You are stealing that 5% of that small business man's earnings, the money he has to educate his children with.

      He pays you your salary for your service, he contrbutes to your health insurance, he is foreced to pay you holiday pay. What else do you want?

      If the government wanted to provide you with your social needs,  whenever you reach that age. then  they should have done it right. Set up a social security department where you the employee contribute  your own cash,  for your own retirement.

      Stop sucking the employer's blood, you guys are unreasonable and have no conscience. you want everyting for free.

    • Anonymous says:

      First,  I took this option and I have to repay money into my pension account every month. Learn the facts before you open your mouth.

      There is no guarantee that people who didn't take this option will not have to vist Social Services either you know.  As it is not written in stone that the people who did take this option will need a hand out.  You have no idea what the future holds for anyone.  Situations change overnight.

      Would you have preferred for people to default on their mortgage, suffer the loss of their home and then pay rent for something they will never own.  Now that is what I would call a stupid answer to a problem.

       

      • Anonymous says:

        First of all – "pension for property" as a concept is not a terrible idea and for example in Canada (the example we were given when the law was being framed) it has been quite successful. However the main difference is in paying it back to your pension and this is where the Cayman version really falls down.

        Anonymous 22.44 states that they are repaying money to their pension every month however all they are paying is 1% of their salary for a period of 10 years with the maximum pensionable earnings of CI 60k this equates to $600 per year or $6,000 over the 10 years. 

        If you had taken the full $35k which would have been compounding over that period then it is plain to see that your pension will be seriously diminished by the time it comes to your retirement. Also the earlier in your life you take that money out the worse it will be (due to compounding)

        This poster also states" Would you have preferred for people to default on their mortgage, suffer the loss of their home and then pay rent for something they will never own" – well this law does not in any way help those people as you can not withdraw from your pension to pay a mortgage you already have unless their is only 35k left to pay on that mortgage.

        The government commissioned "mercer report" has already told us that saving 10% (on max of 60k per year) is in no way going to be enough to sustain people through retirement and to then remove 5 years of savings from the pot is really playing with fire.

        I have no doubt that Elio's heart was in the right place but this policy was not the right way to go – it is yet another time bomb waiting to go off. 

    • Anonymous says:

      They already Are sucker

    • Anonymous says:

      You're paying for every public servants pension!!! is that ok with you??