(CNS): The employment ministry has announced that the first of a long list of amendments made in May to the law dealing with the mandatory pension regime in the private sector will come into effect on New Year’s Eve. But it will take more than three years before the entire piece of legislation and regulations will be fully implemented, paving the way for expatriate workers planning to leave in the next year or so the chance to get a refund on their contributions. The change to the retirement age will happen immediately but other elements of the law will be implemented in February and March.
In a release from the employment ministry, officials said that parts of the law dealing with transfers and refunds will commence at the end of 2017, one year after the start date for implementation and over the following two years. On 31 December 2017 the criteria for transferring pensions overseas will be the termination of a member’s employment, the member no longer residing in the Cayman Islands or the end of pensions contributions for a period of 2 years or more.
Under the new law, refunds of contributions will no longer be allowed unless the member – who has attained the normal age of pension entitlement (65) – can provide evidence to the Director of Labour and Pensions that he/she cannot transfer the pension benefits to another pension plan, pension entitlement savings arrangement or life annuity. This amendment to the law will commence in three years, on 31 December 2019.
“This will allow members who are currently considering utilising the refund option the ability to do so, as well as give employers time to plan in the event that employees decide to leave the jurisdiction,” officials said about the elements of the law that have fueled some of the significant controversies still relating to the amended legislation. The decision to take three years to fully implement these changes will give workers the chance to leave Cayman and still get a direct refund.
Employment Minister Tara Rivers, who has responsibility for private sector pensions, described the changes as a milestone as the law had not been changed significantly for more than 18 years since the regime was first launched.
“We are happy to have taken this significant step forward which has resulted in the Office of the Complaints Commissioner (OCC) confirming that the Ministry and the Department of Labour and Pensions are substantially in compliance with the recommendation made in the OCC’s 2010 Own Motion Investigation Report entitled Penny Pinching Pensions,” Rivers said, adding that the refinement of the regime would be a “work in progress” and government would continue review the regime.
Setting out the timetable in a media release on Friday, officials said that as of 1 January, the “normal retirement age” will be replaced by the “normal age of pension entitlement” to remove enforced retirement and move back the date when people can draw on a pension from 60 to 65. However, people over the age of 48 in 2017 will still be eligible to opt for 60 as the normal age of pension entitlement but those aged 47 and younger in 2017 will fall within the provisions of the new law.
The other major amendment that will start on New Year’s Day is the maximum pensionable earnings, which will increase from CI$60,000 to CI$87,000, forcing employers to pay contributions on more of their better paid workers’ earnings. The maximum amount does not prevent bosses or workers paying in more if they choose to do so.
In February more changes will be implemented, including the increase in and introduction of new fines, such as administrative fines, which will be defined in regulations. Then in March changes relating to employee definitions will come into effect. Caymanians who are under 23 years of age and pursuing full time education and their employers will be excluded from the mandatory contribute regime.
A new definition for domestics will mean that their employers are exempted from having to pay pensions, not just for those “employed to do housework in private residences” (private maids), but all domestic workers, including maids, child care workers, care givers or even gardeners, even if they are working full-time, if they are an independent contractor or an employee of an independent contractor.
With a number of significant changes happening in the first three months of next year, Christen Suckoo, chief officer in the ministry, said people needed to get to know the changes and how they will be effected.
“These changes are significant for various segments of the population and we urge employees and employers to familiarise themselves with the new law,” Suckoo said. “The Ministry and Department of Labour and Pensions will continue to provide education and information regarding the changes made as a result of the National Pensions (Amendment) Law, 2016, and the Department of Labour and Pensions will continue to meet with the pension plan providers to go over the changes that are occurring in the law.”
For more information about the National Pensions (Amendment) Law, 2016, contact the Department of Labour and Pensions on 945-8960, email the Department at [email protected] or visit their website at www.dlp.gov.ky.
A copy of the National Pensions (Amendment) Law 2016 (Commencement) Order, 2016 and the Normal Age of Pension Entitlement Option Order, 2016 can be found on the CNS Library.