CS pension liability growing

| 29/09/2011

(CNS): The government has paid nothing into the growing pension liability it faces for civil servants who will be expecting a fixed pension based on their earnings when they retire, the Legislative Assembly heard on Wednesday. Answering questions from the opposition, the premier said that since taking office there had been no money to pay against the pension, despite the warnings issued by the 2009 Miller-Shaw Report and the Office of the Auditor Generals about the size of the liability, which is over US$324 million. The premier also revealed that no health fund had been established to address the government’s future liability for health care costs for retired civil servants, which is estimated to be over US$798 million.

The question of government’s growing contingent liabilities saw the premier and the opposition leader clash across the floor of the chamber when legislators returned to the country’s parliament and it was revealed that nothing had been paid towards any of government contingent liabilities since the UDP took office, despite having a $25 million surplus this year. Bush said that current pension payments were being made but the government was in no position to address the future liability.

It emerged that during the PPM’s administration more than $58 million had been paid into the pension fund to address that liability, which stood at $324 milllion in 2009, including during the last budget which returned the deficit of around $80 million.

Since then, no further payments have been made. McKeeva Bush said that his government would begin to pay money in when the public finances improved, as he railed against the opposition leader, saying that he could not pay in because there was no money because of the PPM’s irresponsibility and they would not admit they had left the economy in shambles. He also claimed that, given the size of the liability, even if they had matched the PPM’s payments, the liability would be hardly reduced.

McLaughlin pointed out, however, that the PPM had included some $14.5 million in payments towards the growing future liability in each and every financial year of their administration and noted that had they not put that in their budget, perhaps they could have claimed a surplus in their final year in office in the way the premier had done for the most recent financial year.

In the Miller-Shaw report, the authors had pointed out that the government had a number of serious and growing contingent liabilities that had to be addressed. The implications of the liability, the report said, were considerable. “A liability has been incurred which future generations will increasingly have to meet in cash terms for which an inadequate provision has been made,” Miller and Shaw wrote, adding that it needed to be addressed urgently.

The government also has an estimated  liability of around US$798 million in regards future health care for civil servants when they retire, and the authors of the report said this was another pressing issue that government had to address and also noted that government guaranteed loans taken by out by statutory authorities amounted to around CI$142 million. Bush said he was not concerned about the loan guarantees as there was no likelihood of any of the authorities defaulting on the money they owed.

Speaking about the wider recommendations in the Miller-Shaw report, which was commissioned in 2009 to assist the government in generating new revenue and cutting expenditure, Bush said of the twelve main recommendations his government had followed six of them, which included not introducing direct taxation.

The premier said he had reduced operational expenditure by cutting civil service costs, he had completed all the audits of government departments, the ESO was working on improving the accuracy and frequency of statistics, and the plans for the Shetty hospital, Cayman Enterprise City and the Dart Alliance were examples of attracting private capital, as recommended in the report. Bush further claimed that he was implementing the recommendation to diversify or privatize government assets.

Although nothing has yet been sold, he said the sewage works was still going through the tendering process and it would be divested before the end of the year. Bush gave no further details of the process but CNS understands that the sewage bid is now on its third round after several changes and to the technical committees, conflicts of interest and various other issues that seem to have plagued the process. The technical committee had reportedly made a recommendation after the second time around examining bids of a locally formed company, just a few weeks ago, but it is understood that the recommended firm was not accepted and the process was started again.

Other attempts by the government to sell assets, including the GOAB and the Water Authority itself, were halted as a result of the level of opposition in the community.

The Miller-Shaw report was commissioned in 2009 and completed in February 2010 and it recommended a number of actions government could take to improve revenue and reduce costs. It also spoke about lower work-permit fees and in particular reducing the civil service head count and operational expenses.

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  1. Anonymous says:

    With over $300 million pension liability how can the Premier and his mininons say that we have a $25 million surplus that the Premier says that he is going to use to give the civil servants a raise – to buy their votes of course.

    When the Premier does not count his liabilites then he will always have a surplus.

    If businesses did not pay their bills then all businesses would make a "profit".


  2. Anonymous says:

    Our Pension Laws needs to have a very serious review and it MUST be done before the end of 2011. It is a disgrace and very dishearting to the workers who are making theircontributions and they are being wasted by bad investments.

    I am sick and tired of getting my pension statement and look at it decreasing everytime.

    I am over 50 years old and worked very hard up til now and it just irks me to see that there is nothing being done about it. Give us back our money now because I do believe we can do as good as job  taking care of it as what these Pension Companies are doing. Investing in crappy stocks and ripping us off. Always blaming it on the bad economy, yes I know that plays a part of it but I still believe we are not getting our monies worth and probably those managaing the Pensions Funds are charging extremely high fees.

    Do Government even do an audit of these Pension Companies to see exactly what they are doing with the Pension contributions?

    Some of them managing these Pensions don't give a damn about what the people will have to retire with.

    Please Politicians I begging you to do something about this before we have nothing at all. I WOULD LIKE MY PENSIONS CONTRIBUTIONS NOW. I can place then in a interesting bearing account or a fixed deposit and manage it myself. Enough is enough.

    Isn't anybody listening the pleas out there about important issues such as these?




  3. Anonymous says:

    MAC WILL NOT PAY PENSION FUNDS.    I HOPE THAT all of us civil servants remember this come the next election. i for one will reminding  everybody in my department. The goverment have money to give to churches, and thier cronies. but they cannot pay .  This is thier obligation but mac has to help his pastors first. i hope that these churches has to show how this money was spent

  4. Dreadlock Holmes says:

    The seriousness of this issue can not be swept away, like so many others. The government has a moral and legal obligation to civil servants to make good on their pension contributions no matter how lopsided they are.

    Did they not anticipate this when the agreement was made to pay civil servants' contributions for pensions and health care?

    It might have looked good at the time and a great way to ensure votes, but it appears there was no thought given to how this could ever take place or how it could possibly be afforded by government.

    The Shaw-Miller Report pointed out this elephant in the room quite some time ago. We all read it and I'm sure many civil servants read it.

    Did they think it was going to come out of a hat? Magically appear from somewhere?? Basically your employer has lied to you.

    The most disgusting part of this escapade is that high ranking government officials including the beloved Premier have been able to circumvent exisitng pension laws or modify them and gather up their own pensions in the meantime. While they were still employed. Knowing full well themselves the extent of the government's non-contributions for civil servants.

    It is a very serious issue.  And I believe until it is fully addressed those who have been collecting or 'double dipping' should have their pension money clawed back until everyone plays by the same rules.

  5. Anonymous says:

    Another disgrace is that MLAs passed a provision which allows them to take the cash out of their pensions so that they do not get caught when the system fails. As a recall a previous FOI request has shown that a number of MLAs and former MLAs have already done this to protect themselves against what civil servants are exposed to.

    • Chris Johnson says:

      I am perplexed. How does this government not collect it’s debts such as the Ryan debt and then give millions away to the churches thus leaving civil servants pensions in the air. The pension contribution is a liability and the non collected Ryan debt and church contributions are clearly donations that are unnecessary. If I were a civil servant I would be taking advice about bringing a negligence claim against the Government. In fact I would take delight in assisting them. This madness has to stop.

  6. MER says:

    I am a frequent poster about the disgraceful manner of which our Civil Servants pensions has been handled. I have emailed almost every MLA [including the Premier] amongst other pensions officials and even members of the press. It is horrible that people who devote their lives to working for our Government should be retired without a dime to their name, my own mother being one of them. It is unimaginable the hardships this woman now faces because of a dishonest, neglected system that people are FORCED to submit to. You work many years expecting that at least upon retirement you have something to fall back on and the shock of not recieving anything at all, no payment no monthly assistance is detrimental for persons over 60. Our Caymanian community supposedly takes pride in our elderly and the culture they remind us of, but yet after years of public service they are left to fend for themselves like wild dogs, as in my mother's case doing domestic work for family and friends to make ends meet. And with me being an only child with children of my own I try the best I can to assist but in these trying times even your best does not feel enough to a woman you owe your life to! The pensions system in the Cayman Islands is utterly a disgrace from top to bottom!

  7. Shock and Awe says:

    There are several people working in government who are already collecting pension and a salary. They are all MLA's including the Premier.

    But…there's enough for them to collect a pension.

    Go figure.

  8. Michael Mouse says:

    Tick tock goes the bankruptcy time bomb.

    All the fanfare about the surplus was a LIE.  The surplus is no surplus, especially when we now find out the government has been maxing the credit card out and not paying the bills.

  9. Anonymous says:

    Just a little more rope

  10. Anonymous says:

    "It has been said that democracy is the worst form of government except all the others that have been tried."  ~ Winston Churchill

    Cayman indeed has staggering and ever growing unfunded pension and medical coverage liabilities for civil servants.

    However, as we are a democracy where only statesmen (not politicians) look beyond a four year election cycle, this will always be put off so that the electorate can have "jam today".

    Add to that the democratic reality that our civil servants (which I would define to be those who are paid from government funded sources, so not just civil servants by the strictest definition, but also employees of authorities and other quangos) are by far our largest voting bloc. What does that mean ? It means that pension and medical benefits, even though everyone knows they are far, far more generous than any private sector employees receive, will never be cut.

    So, the wonders of democracy. Costs that will never be cut, Liabilities that will never be funded, and therefore a "Surplus" showing under the wonders of art over science that are the  CIG accounting and reporting practices.

    As one of the creations of the recently departed genius that was David Croft would say (Private Fraser – Dad's Army) – "Doomed, we are all doomed".

    Are we though ? What would be need to salvage the situation ? Some suggestions :

    – An electorate that is strong enough to vote for Statesmen who will take the long view for their country, not those who will pave driveways and promised not to cut civil service staff benefits.

    – An end to the security of contract and tenure for civil servants. Private sector employees in Cayman have no security beyond their current contract. Give civil servants two years notice that their benefits will be cut to fit what Cayman can afford, then let them make their choice where they can (yes, I accept that some have little choice but to stay where they are)

    – Cut medical and pension benefits to the same level as is required by law. While we are at it, match all immigration and labour laws (let's not have the farce whereby staff about to be rolled over jump to work for the one employer that doesn't have rollover… CIG)

    – Take the hard step of making and executing a long term plan to pay down the unfunded liabilities, even if, yes, that may mean cutting the single largest cost in CIG, staff emoluments.

    Chances of all of that happening ? Answers on a (very small) postcard please.

    • Anonymouse says:

      Oooh, I know, we can also nationalise health care and Old Age Pension. That'll solve the problems. – Be careful what you wish for, you might end up with what you left behind.

  11. Anonymous says:

    I was wondering when this matter would be raised. This has been pushed to the background for years and when the Compass did an article on the matter a few years ago it was quickly "hushed". This is an issue of MAJOR concern!!!

    Civil Servants need to file a "class action" FOI request for full revelation of the Public Service Pension Fund and the status of their pensions. Don't take for granted that they could be left without any pension or health care benefits. Even if local management of the civil service pensions were blameless, look at all the global factors which could have eroded these funds – economic downturn, Lehman Brothers et al failures, Madoff investment scams, etc. etc., which affect pension funds investments. WHO HAS BEEN PAYING ATTENTION TO THIS???  

  12. Anonymous says:

    So, let me get this straight.   

    I was required by LAW to contribute funds, along with my employer toward my pension.  Said pension fund, in spite of their claims that only 10% was speculative, took several alleged serious hits, and I lost thousands from my pension.   This legal screwing took place for four years, long after the Enron debacle's influence.   I think they did it because we had no recourse;  Surprise, surprise, Mr.  Indentured payee, you lost money yet again.   Sucks to be you.   Better luck next year. 

    So now we find out that the government hasn't been paying their MANDATED due?   That which the rest of us would be fined and JAILED for?   Do you think I could just get what's left and invest it myself?   Nope.  Not until my early retirement date, and even then I can't get the whole mismanaged amount. 

    Thank you Cayman Islands Government, for showing the way.   I wish I enjoyed an equal amount of fiscal protection, because I could've kept my earning in a SOCK and made more money.  

  13. R.U. Kiddin says:

    "The government has paid nothing into the growing pension liability". (which is over US$324 million)

    "no health fund had been established to address the government’s future liability for health care costs for retired civil servants,"  estimated to be over US$798 million.

    Why am I not surprised…………


  14. Anonymous says:

    how about we deposit our pension  money into a local bank account that can never be touched until retirement… that way everybody win the bank has additional funds, the employees money don't dissappear?

    • Anonymous says:

      Did you forget the Dormant Bank Accounts law whereby if you don't use money deposited in your bank for 10 years or more, the government will dip in and take it?

  15. Anonymous says:

    No retirement, No health Insurance, UK and taxes here I come.  Let me pay my high taxes in Europe or the USA atleast I will be able get some type of retirement money and when I need health care I will be able to get some and not lie by the wayside and die like a dog.  Seems as if there is really no tax free, sooner or later it will catch up with you.  This is scary especially if you are up for retirement in 2-5 years. 

  16. Anonymous says:

    So is this how Mac arrived at a $25 million "surplus"? We demand the real truth, Mac. Not your twisting of the truth.

  17. Anonymous says:

    And where is our $25 million surplus again?

  18. Anonymous says:

    Amazing no news organization has addressed that civil servants did not have the 3.2 percent reinstated like McKeeva said they would. Anyone asked why? Yet another statement by McKeeva that never happened and then people forget and move on.

  19. Anonymous says:


  20. so anonymous says:

    In other words Cayman has already reached its best its ever going to get and started down the other side.  Now it will just get worst no matter what steps are taken as it is already too late.  The only question is how bad and how soon.  And the reason is the promise to take care of the many wellfare recieptients Cayman calls civil servants for the rest of their lives by takeing the money from everyone else.  Good luck with that Cayman.  Your going to need it.

  21. JeepersCreepers says:

    OMG!! If you are a civil servant I would seriously start thinking about whther you are going to have any pension at all, as the shortfall is staggering and lets face it, no government is going to be able to plug this hole. So who will be left to make up the shortfall – young Caymanians – direct taxation here we come!!! 

    • One man says:

      You can definetely expect that in the future, civil servants will not receive the full pension they expect. Cuts will have to be made in the pension payments when current generations retire.

      • MER says:

        Now we fully understand why McKeeva has already pulled his out! He knows what is going on, every shady detail of it!! This is absolute madness and I believe it is time for people to stand up and look deeper into this! I have been speaking about it for almost two years now, since the day my mother was retired, and I am certain she cannot be the only one not recieving a dime! But people have become keen on accepting whatever nonesense our worthless Government shoves down our throats, something has to be done!

  22. Anonymous says:

    How can Mac be expected to pay anything into the CS pension fund (which is just a legal liability after all) when he has the expense of Nation Building and giving over $4,000,000 away to the churches and other "worthy causes".

    C'mon get your priorities right!!!!

    • so anonymous says:

      Obviously his priorities are not the same as your priorities.  Good for his (voters)churces bad for everyone else.  Get used to it or leave "his" island.

  23. Anonymous says:

    The suggestion made (  i beleive by Dan Scott, Roy McTaggart et al)  that would allow the pension fund to invest in the new government building should be pursued posthaste.  The building would essentially still be owned by the people of these islands and the financial return would be guarunteed through the permanent tenant being the government departments.

    Sounds like a win-win sitaution to me.  What are we waiting for? 

  24. Anonymous says:

    Not paying into pension scheme while telling people that their pensions will be there? How is that different from a Ponzi scheme?

    • Anonymous says:

      Not only that, how can CIG prosecute businesses for not paying pension when the Gov doesn't even pay it??

      • so anonymous says:

        Easy answer.  Have you heard of any more businesses being prosecuted?  You know why?

      • Anonymous says:

        Companies also have their staff rolled over and have to report financial statements. Two sets of rules. Caymanian vs expats through and through.

        I'm afraid all of us who call this home are merely frogs sitting in boiling water. 

  25. Anonymous says:

    But there is a surplus, right?  A surplus is by definition not needed for anything else so why can't they pay that in? It's like saying you don't have any food while you're standing next to a pile of beef patties. Either the surplus isa figment of McKeeva's imagination, or his statement that there's no money for pensions is demonstrably false.  How does he get away with these bare faced contradictions?

    • so anonymous says:

      Because you all let him.

    • noname says:

      And why in the world did you belive him, still belive in him , and will belive in anything he has to say after everything he said he would and did do but didn't?  The only surplus on Cayman is Your complete faith in a man who can't keep his word to anyone.

  26. Anonymous says:

    And now we are starting to see where our budget 'surplus' is – its there through non-payment of other liabilities as I said all along.  I bet this is only the first worm to emerge out of the can, and there'll be many more in time to come.

  27. Anonymous says:

    So all teh MLA's have been double dipping and not contributing to the CS pension fund.


    Bunch of crooks, the lot of them.

    "My hnads are clean and my heart is pure". MacKeeva Bush, 2011.

    • Anonymous says:

      That's why they are double-dipping, coz they know the well is drying up QUICK

  28. Anonymous says:

    You are getting your pension tho right mac? Also nice holidays on the public purse with family and friends, maybe that money in the nation building fund would help to put a dent in that, what do you think, what? doesn't benefit you.

  29. Anonymous says:

    My goodness when will it end?  how can the government have money to give away to nation building funds and COLA givebacks while the pension plan is in arrears, what is going to happen when the baby boomers retire where will the government get the money for their payout? I hate to think of what will happen to retirees and the money that they depend on to take care of themselves.  Taxes we had better be prepared to payout, this tax free ride is coming to an end soon. 

  30. Anonymous says:

    What do the politicians care. The ones that are able to have already cashed out their pensions.

  31. WOW says:

    This is not good. What are we going to do with those Civil sevants who retire and need their pension? Why are we not looking out to ensure they can at least retire without worrying. How will we ever make up this shortfall? $324 million is a lot of money and I dont see this Government or any other being able to catch up. Health situation is also very scary, as people get older they inevitably need increased health care. 

    It is time to legalize gambling, as much as we hate to hear this, it seems this may be part fo the solution.

    I wonder though, how is the cost of health care, post retirement, any different in the private sector. When I retire will I be able to afford good health insurance? or will I be deemed too high risk ? This is a concern for everyone!