Pension break take-up slow
(CNS): According to some of Cayman’s leading pension providers, less than 1% of their members have taken up the opportunity offered by government to take a holiday from the compulsory pension payment of 10% of earnings, made up of a joint contribution between employers and employees. Brian Williams, CEO of Saxon Administration, the agent for Silver Thatch, said the take-up is not as much as the industry was expecting and he believes employees recognise the advantage of gaining the 5% match from their employers and are reluctant to give it up. Although the temporary amendment to the law is relatively recent, Williams said he did not expect there to be any considerable increase over the coming weeks.
“We don’t really expect to see any great demand for the holiday now,” he said. “It seems our clients recognise that pensions are a long term commitment and that in the long run it is in their best interests to continue paying into the fund. Also employees see that they will lose the contribution from their employer if they opt to take the break and most see how that is not worthwhile.”
Williams said that Silver Thatch worked hard on communicating with its members and believed that the flow of information had helped. He said the young people involved in the recent investment competition run by Saxon had also done a great job carrying the message home to family friends about the importance of long term investments and pensions for the future.
A spokesperson for Fidelity also said they had seen very few people opt out of its scheme and said figures were around 1% of their members. “It is still early and we may see a few more but we really don’t expect to see a major take up after all,” Fidelity said.
While Silver Thatch and Fidelity members tend to be employed by larger firms and professionals, the Chamber of Commerce Pension scheme has a wider membership among the lower paid sector and work permit holders. As a result, Robert Schultz the Customer Relationship Manager of the Chamber Pension Plan, says he expects the current low take-up to increase over the next few weeks but was surprised that it wasn’t more widely utilised.
“As it stands, about 2 percent of our active members have participated,” he said. “I expected more due to the demographic that I saw being effected most.”
Schultz explained that work permit holders from the Jamaican and Filipino communities tend to remit money and so he was anticipating a significant amount would be opting out and having a more marked impact on the plan. “Hopefully they are being properly educated by employers that if they participate then they give up the 5 percent match.”
At present only 112 people of the more than 6,250 active participants have taken up the holiday, but Schultz said more applications had come in so the figure would go up a little more.
CNS also contacted the Pensions Office last week but it said it could not reveal any of the statistics to the press without following the protocol of contacting the ministry for permission first, and as yet no information has been forthcoming.
However, a significant number of business owners told CNS that very few employees have chosen to take the holiday. A member of the Pension Board also said it was an unwise move for people to take up the suspension as it would have a much greater negative impact down the line, far outweighing any immediate cash gain in the short term. “Losing the five percent match is a significant disincentive for many people and its good to see most employees are smart enough not to take up the suspension,” a member said.
There were, however, concerns from the board and in the wider community that one or two unscrupulous employers were cajoling members to opt out of their pension plans against their will.
Brian Williams said he had also heard this was happening but he said employees should not be coerced or threatened into taking up the holiday. He advised employers to talk with their staff properly and not force them to take the break.
“It seems there is some talk of coercion and we urge employers to have constructive conversations with their employees regarding the pension holiday and if businesses are struggling it may be better to reduce the contribution instead of stopping altogether,” he added. Williams suggested reducing contributions to 6% from 10% with each party paying 3% instead of five. He explained this will improve cash flow a little for both employer and employees without causing as much damage to their long term investment.
Amendments to the pension law were passed in the Legislative Assembly in February and came into effect at the end of April. The changes allow employers who are up to date with their compulsory contributions and who get the agreement of their employees to take a break from their legal obligations to pay into pension schemes for at least one year.
Rolston Anglin, the minister with responsibility for employment who brought the amendment bill, said the goal was to reduce the burden on employers as a result of an increase in work permit fees and to give employees who are also feeling the economic pinch access to the 5% contribution they are asked to make under the law.
Government also hopes it will give the numerous delinquent employers time to catch up on the significant outstanding payments. He said, however, that employees should not be forced to opt out and only employers in compliance with the law would be allowed to stop making contributions.
The holiday period is for 12 months for Caymanian workers and 24 months for those holding a work permit.
“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 askingfor 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.”
Anglin said the suspension would be reviewed after the first twelve months.
Category: Headline News
The pension holiday is in no way really working. What they should have done is maintain the way it is and revise some of the rules. Expat workers (like me) has to wait 2 yrs (if over $5000) before we could have refund.
Employers needs help in a different way not on a pension holiday. Help them by giving incentives, trainings, perks, etc…..
I never quite understood why it had to be an agreement between employee and employer in the first place. If you want the holiday then what business is it of the company? If anything, they are there to advise you but at the end of the day if I’m not mistaken they would be saving money, right? Anyway, I took it and I never had any problems. I submitted the forms and a copy of my passport, and received the certificate in the mail in no time.. I don’t know if it is/ has been a little more difficult for foreign nationals?
And before any of you jump on me I am a young person (under 25), not making ‘an arm and a leg’ at my company, and I did my homework before I signed anything. I weighed the pros and cons:) A little extra cash in my pocket wouldn’t hurt right now, especially with all this talk of taxes and VAF’s (lol)… shoot, they even want to charge us for a cheap plastic bag from the supermarket now…
You are so correct. The under 25’s benefit the most from this offer because their relative contributions tend to be so low and the value attributed to the limited disposable income is higher.
Really, and I was told this from a successful London actuary, worrying about pension contributions before you are 30 is a waste of time especially for professionals and the scare stories from the pensions industry are just marketing tools rather than decent advice.
One of the reasons is the Pension providers are making it difficult for you to take advantage of it. I need to get notarized copies of passports, original signed docs from Employers – nothing like it was to get "into" the pension program in the first place. They should make it a simple sign here if you want out…Think about it…the Providers lose $, they lose fees so why not make it hard to resign from it. Don;t be fooled by what they have said above…I have been in the Silver Thatch since inception and they have done a poor job of managing the $. My value is not much more than what I have contributed with my Employer. I can do a better job managing it myself thanks.
Part of the problem is their mandate set out by Govt basically keeps everyone in a Balanced Fund so low returns. We should have a choice as to the type of risk we want to incur. my 2c worth.
I’m sure Most of the people wants to take the holiday, but it’s really difficult taking in consideration all the information they are asking and the most important obstacle is that you are in arrears you’re not legible to apply so that it’s not help.
If the company owes 3 months then the logic should be to give a plan payment but is not the case.
Yes, that is because employers & employess are not fool-fool like the premier who proposed the pension holiday.
It’s not the pension providers who are making this difficult – read the actual Amendment to the Law – it sets out the policies that the providers need to follow. The providers had nothing to do with the drafting of this Law. If it were up to them, this stupid Law would never have been passed. It’s just causing the administrators more work and guess who is going to end up paying for this increase in administration – YOU!
I do agree with you that the members should be able to choose their risk tolerance and decide which type of fund they want their investment in.
Why do permit holders need to pay pension? All it means is that companies have to fork out a 5% "bonus" every pay check. They are leaving anyway unless they end up with status or perminant residency in which case they can start paying pensions.
We would be better off charging work permit holders 5% "Tax" on their salaries and put it into pension funds for the infirm and disabled.
Companies would save 5% and the system would gain 5%
Just my thoughts.
If coming up with suggestions to find someone else to pay for your things was an Olympic sport, Cayman would have real medal prospects.
I agree, in fact why are we paying permit holders at all, lets round them into camps and make them work for free
Work permit staff that come here are either very poor and could not afford to pay 5% tax, so wouldn’t bother coming here or they are professionals that would demand a 5% pay increase in equivalent terms from their employer to cover the 5% tax. Very few professionals would swallow a 5% pay cut to subsidise those lazy caymanians and unlike the civil servants they could ply their trade anywhere and do not limit themselves to one island for opportunities.
Employers would end up forking out the extra 5% in tax anyway plus the 5% the employee still demands in their pension. So nobody is better off. Government loses more fees as more business leaves, caymanians lose jobs and livelihoods.
Nobody comes here to work for the fun of it, it’s the money that brings them here and it’s a good job they come because your lives would be much, much worse without them here. Fishing and rope making don’t pay well enough for your holidays, blackberrys, 4x4s and big houses. Thats all you’ve got without the work permit holders and the business they bring.
And foolish thoughts indeed they were, another one that wants’ someone else to pay someone else bill, why should work permit holders be the only ones to pay? is this not your country also?
people like yourself need to wake up and smell the coffee my friend, the peter pay for Paul and Paul pay for all mentality or the it should be mines because i’m a local is not working anymore.
Why don’t we take 5% of YOUR salary and put it into a pension for the infirm and disabled….No? I thought that would be your answer!!
Permit holders are also planning to retired at some point in their lives you know – they also NEED a pension. They are entitled to accumulate a pension for themselves whilst working here.
The reason is that pensionsare there to provide you with a means of living in your retirement. Some work permit holders will get status or PR and will remain in the country after they finish working. The Government needs to make sure these people have adequate income provisions as well and making everyone contribute to a pension is the best way to do this.
What are you talking about? Cayman workers in the construction industry, domestic helpers, gardeners, etc. many of them expats already make some of the lowest wages in the Western Hemisphere and without a minimum wage. Think again before you make such a dumb-a** proposal. On top of that, they have 5% deducted from salaries which is often not forwarded and used to reduce their wages even more!
Some companies are not giving their employees the opportunity to take advantage of the pension break which could be a reason why it appears to be taking off slowly. Both the employee & employer have to agree and as some companies are reluctant to do so.
Then the employer is either daft or protecting the employee as it means paying their employee 5% less if they take the holiday up.
It is not an advantage to take the holiday up for the worker, the only advantge is to the company
Cash up front might be in the best interest of the em’ee if he has a better use for the funds (can make a better return than the plans returns – which have not been stellar if positive at all) of course also taking into account the 5% em’er contribution (to a max of 60k – unless em’er agrees to pay more) which would no longer be received.
Furthermore the funds cannot be taken by an expat upon leaving the island for two years – unless taken way by a transfer directly to another plan which would preclude the em’ee (in Canada anyways) from receiving a tax deduction for the contribution.
I did look into taking the holiday but the paper work was a bit heavy and the difference was negligible.
If the e’ee can make a 100% returns on his 5% then go for it.
for example you get paid CI50k a year
take the holiday and get your CI$2,500 in the year into your pocket.
Don’t take it you get CI$ 5,000.
hence you immedeately have to double your money
You are completely correct! My Company told us that THEY are not opting to take advantage of the Pension holiday. We, the employees did not have a choice in the matter!
You should be grateful that you have a caring compassionate employer.
The law says that both parties must agree. As soon as any one party disagrees then the argument should be over.
When the employer decides not to pay, you an be assured that the employee will have to "agree" or no longer be an employee.
You are not properly informed. Them employer have the option of not participating if they don’t want to, but if the employee would like to continue or discontinue, the employer must meet the employee request.
thanks,
You are the one who is not properly informed. Voluntary means just that: voluntary.
The employer has a choice and so has the employee, irrespective of what the other party desires. No one can force the employee to sign and neither can anyone force the employer to sign.
The employer should however inform employees of changes in the pension law.
So you want the choice to cut your own salary? Fool.
Why would anyone in their right mind opt for having a lower remuneration?
the people obviously have more sense than than the elected officials who brought in this nonsense….