Over $400 million taken from pensions
(CNS): With just a few more weeks to go before the emergency pension fund withdrawal opportunity ends, Caymanians and residents have already taken over $400 million from their funds. Almost 34,000 successful applications were made to take money from pensions and over 71% asked for the full amount, which was $10,000 plus 25% of the remaining balance.
Once the numbers for September and October are tallied, government’s prediction that the emergency withdrawal would inject some CI$500 million into the economy will prove fairly accurate. Nevertheless, questions remain about how long the money will sustain the domestic economy in the continued lack of tourism and the potential impact of a global recession in the coming months.
In addition, the Cayman Islands Monetary Authority has not yet revealed the remittance figures for the third quarter of this year, which might indicate how much of this cash was actually sent overseas. Remittances in the second quarter plummeted against the annual average because money transfer businesses were closed or on very limited hours during the lockdown and did not return to normal service until July.
While the move by government received overwhelming community support, the main objectors being the pension companies, there are concerns that the hole this has created in people’s retirement savings will present future governments with significant problems.
During the next sitting of the Legislative Assembly, opposition member Chris Saunders (BTW) will be presenting a private member’s motion asking government to establish a select committee to review the National Pensions Law and make recommendations to ensure the adequacy and viability of funds registered in the Cayman Islands.
“The thinking behind this is to make sure that the decision to allow people to access part of their pension now does not create a future burden on future generations,” Saunders said in a social media circular about the motion. Saunders has been a vocal advocate for a complete overhaul of the current pension regime and has argued that it is woefully inadequate.
This is a sentiment shared by Premier Alden McLaughlin, who has on a number of occasions lamented the decision made in the 1990s that paved the way for the private sector to take on the mandatory pension programme for all workers outside the civil service. He has often pointed to the success of the public service pension fund compared to the problems in the multiple funds that private sector workers pay into.
In April, as government changed the law to allow people to access their pensions during the COVID-19 lockdown, he implied that a national plan for the private sector may be in the pipeline, but in any event a radical change was required.
At this point government has no plans to expand people’s access to their pension funds and 31 October remains the deadline for members to apply to make a withdrawal. However, the pension holiday on payments has been extended until the end of the year, freeing employers and workers from the obligation to make the mandatory monthly 10% payments into a fund.
My former neighbor (before my home was foreclosed, after paying on it for 19+ years!) pulled out the maximum from his pension, and has invested it in an international money market account paying over 17% at present. Its overall gain historically is closer to 22%, so it can and will go higher. He’s also sending what pension funds he does NOT now have to contribute into that fund as well. It is NOT doing diddly for the local economy, but it is building a solid retirement fund for him, so he will not be a burden on the taxpayers. After paying into it for only 17 years, it has a current asset value of $2.1 MILLION and still growing.
His income is in the mid 6 figures, and every penny over and above his very conservative budget is now going into a foreign investment that will actually grow exponentially. His home is mortgage free. He is 49 years old.
I’m Caymanian, female, college educated and unemployed, formerly homeless for one year. My silly $204/month “pension” doesn’t cover my phone and internet service, and I can’t find work because I’m over 65, yet totally healthy. I have no living family locally. Social Services is all that’s keeping me in a tiny rented apartment, with my food, utilities and health insurance cover paid. Be careful what foolishness you put in place, as it will come back to bite you in the . . . end!
My private sector pension only started in 1999. Over time, it LOST over $10,000 due to fees and investment losses. What a sad joke! I was self employed, so I paid in 10% personally. Steep declines in tourist spending caused my business to fail in 2013, and no one would hire me, even at 61. I’m not the only one, and our numbers will continue to grow, as the population ages and employers continue to cast us older folks aside as so much trash.
The compounding of Cayman Islands pension assets lags the market by 5-10% because our pension providers skim another 1-2% on top of a limited basket, of high-MER, underperforming funds. They are helping themselves to those fees on 50% portfolio weightings in money funds earning 0.25% per year (gross performance before those fees). We are going backwards. The “providers” are the only ones getting rich. We aren’t allowed to self-direct, or optimize to 2020-adjusted portfolio risk-weightings from their 1990 investment dogma. Instead of letting beneficial owners and businesses cheat the savers, why not tell the pension administrators to eat their extortionate fees for 2020, or scale their fee to zero on Fixed Income/Cash/Money Market securities? Their annual fee for doing next to nothing is a lot more than my one time COVID withdrawal, and it helps no-one, least of all, the government 20, 30, 40 years from now. Discuss.
Cayman’s main source of income is through tourism and banking which have both taken a hit. I’m guessing there will eventually be another dip in to pensions to inject the economy but this can’t always be the answer. A lot of ppl have nothing or barely anything left in their pensions and majority have blown through what they got. In my opinion, COVID is here to stay and we have to figure out how to live with it and not in fear of it. We can’t just live in this bubble the rest of our days.
Covid will be a thing of the past within a few months. I think we have too many oppurtunists not wanting to get back to work and wanting to pillage the pension piggy bank.
classic ppm solution to economic crisis:
raid your pension funds and keep borrowing!
just another day in wonderland….
The pensions have not done what they were supposed to do, nor performed anywhere near baseline index ETF returns. I “liberated” max withdrawal amount and now have those funds earning proper self-directed market returns. The kind that would actually allow someone to maybe retire one day. I can access it all, whenever I want. I can use it as collateral for a mortgage. I can draw income from it. Within a year or so, the 25% I withdrew will equal and surpass the 75% I had to leave in the plan. Why anyone would abandon this opportunity to self-direct is what is really baffling.
Can you please share the info . The
Cayman, enjoy the sugar high from your pension that got you the new xbox or flat screen TV. Reality soon come!
Caymanians should have only been allowed to withdraw if they were unemployed & W/permit holders if they were leaving the island and not allowed to return for at least 5 years. As situation now stands most have wasted the funds or sent home and will still be here broke when recession really hits.
And when these unemployed person blow through the $$$ and have nothing left then who will continue to replenish the economy, surely the ones who are employed. The unemployed would simply not be enough to stimulate the economy. You realize there are individuals desperate and stupid enough to have quit their jobs just for some instant money right?! They actually made a good decision in having this open to all who’ve contributed to private pensions.
400 million is a significant sum so how will the system recover to pay persons in retirement? Lets see their solutions.
Why are MLA criticising a system when they have the power to change it? Fix the Law, revise the investments. Public Service legislation has been revised. Private sector pensions laws have been neglected.
Wonder what will prop up the local economy come January 2021 when this program expires?
Bound to be some reckoning sooner or later.
It’s weird that people automatically assume those taking their withdrawals would (a) immediately spend that money, and (b) in the Cayman Islands. How about (c) properly invest the money that was languishing in poorly administered, high-expense, underperforming pension plans, using decades-out-dated portfolio allocation models? Just me?
Need to approve another withdrawal before Christmas or this islands economy will wither up.
Always did love a good game of kick the can.
Only wish it was extended another few months so we could dip again and get another $55k. 2 years to retire , money already invested offshore at high yield. it is not here, rest assured.
If someone is offering you high returns on your money there’s a good chance they may not return your money.
Ask anyone who received those wonderful statements from Bernie Madoff.
The only people allowed to double dip are your elected officials.
And if we didn’t we would continue to lose money in our horrible pension scheme. Yes m making bank now that I’ve reinvested
With their fees, most people need to return 10% a yr to break even.
1-2% mgmt fees on cash/money market portfolio weightings earning just 0.25% per year. Half our “savings” portfolio split is going backwards, actually shrinking year over year. That the gov’t allows these fees is institutionalized theft.
They should check how much of that 400 million dollars was sent overseas to pensioners that were not eligible who left the Cayman Islands years ago and before February 1st 2020 that were able to withdraw from their pension plans. The Immigration Department should be able confirm whether they were on island or not and the Notary Publics that assisted them should also be prosecuted.
Why don’t you talk about the bloodsucking pensions who 1) send money back to Bermuda, 2) collect an administration fee and then subcontract that back out to the law firms 3) who have Trustees in the BVI for same Bermudian based law firms.
Premier & co pass laws and pension fund directors openly flaunt and Premier and co try to lock up funds for the man on the street to feed this beast.
This pension plan is not about saving for retirement Cayman! It’s about creating a few jobs in Govt and at two layers of administration (a few more local jobs) and to enrich the partners and local accountancy firms (VIA audit) and law firms and that is all at the expense of Joe the Public. Its just another Tax bringing the tax rate to 5% plus 27.5% plus whatever other fees and in return Caymanians get an opaque social security scheme and no medical care.
As for me, I keep paying into my US social security even as a Caymanian/ American I’ll take my chances with another broken system that at least has potentially health benefits attached at the end.
Watch soon come state pensions system with an eye watering 20% contribution rate and CInICo for all at another 10%.
A massive hole has been dug over the years and its on the Tim’s and Jane’s to try did themselves out.
#brettwasright
Who cares? If they can’t obey the law, the should be shut down. Full stop.