Private pensioners get access to more of their cash
(CNS): Residents living on private sector pensions can now access marginally more of their own money this year as the Department of Labour, in consultation with the National Pensions Board, approved an increase in the 2024 Retirement Savings Arrangements (RSA) disbursement figure from CI$14,125, the current maximum annual payout, to CI$15,000, effective 1 June.
No matter how much people have accumulated in their pension funds from mandatory contributions from themselves and their employers, the law restricts the amount of money they can take from that annually, a figure that is increasingly unrealistic.
This year’s 6.2% increase over 2023 is based on the 2023 inflation rate, and Department of Labour and Pensions Director Bennard Ebanks said the new amount is warranted.
The Public Service Pension Board announced earlier this week that retired public servants and those over 65 who are drawing down their public service pensions will see a 3.8% increase for this year. Ebanks said that this increase in private pensions would create more equity between retired public and private sector workers.
“I approved an increase beyond the average CPI increase, which would equate to the current minimum annual pension of $15,000,” he said. “This would bring the National Pensions Act (NPA) disbursement in line with what the government has recently set for the Public Service Pensions,” Ebanks added.
All applications received from 1 June 2024 and all approved RSAs are entitled to the new maximum figure of CI$15,000 at their next disbursement, which amounts to $1,250 per month. However, for many retirees, much of this amount must be used to pay for excessively high health insurance or medical bills.
Labour Minister Dwayne Seymour described it as a commendable increase. “In these times of rising living costs, this proactive measure ensures that our retired citizens receive the additional support they need to manage their household finances with greater ease and dignity,” he said.
The money is drawn from private pension plans, which are accumulated from the mandatory 10% of the wages paid into it by private sector workers and their employers, who must by law pay at least 5%. In many cases, the amount in people’s funds is so small that they receive all of it within a few years of retiring.
However, those who still have money in their funds will now be able to take out slightly more, but living on CI$1,250 per month will still prove a significant struggle if it is their only income.
During the lockdown caused by the COVID-19 pandemic, private sector workers were allowed to withdraw funds from their pensions and mandatory contributions into the schemes were frozen for over two years, further reducing the amount in their funds. The government amended the law in 2020 to allow people to withdraw a lump sum of up to CI$10,000 plus 25% of the remaining balance of their pensions.
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This lil 6.2increase will see a 12.4% rise in monthly bills!
Never mind when the crappy 8% Minimum Wage bump is given in July.
A question I would like answered is why the government has any authority whatsoever over how much and when a retiree can withdraw for their pension.
It makes sense to make pension contributions mandatory in order to build up a pension pot (and they are, by law), but to then control how much one takes out restricts choice.
Allow personal responsibility and invest public funds in more education.
For example, using the 4% rule, one would have to have a pot of at least $375,000 for this 15% restriction to even become relevant. How many Caymanians have a pot of that much given the low level of mandatory contributions plus the government allowing people to deplete their pension pot in recent years? I’d wager very few.
It is because the investment return has been so poor that the total fund is nearly depleted. If were were allowed to actually control our own money, the entire fund would be empty within a month. Or less.
You make three points, none of which I understand.
“the investment return has been so poor”. Compared to what ? A quick glance at fund returns of Cayman pension funds for private sector funds show returns similar to benchmark and far higher than if you’d just left the money in the bank
“the total fund is nearly depleted” No, don’t understand. You save money, it makes returns, your funds grows. Why would it be depleted?
“If were were allowed to actually control our own money, the entire fund would be empty within a month” Why? Any responsible individual would manage their fund withdrawals. Do we wish government to manage every decision we make from cradle to grave?
Replying to my own comment as seen one further down that notes that the $15k is only for those who don’t have enough funds to manage on the legally allowed withdrawal rates for those with larger pension pots. The law allows withdrawals at around 4% to begin, increasing as you age.
Allowing those with smaller pots to take out more means the will run out earlier.
The bigger issue is that we have Caymanians with pots so small at retirement that they can only draw less than $15,000 per year at a c4-5% withdrawal rate.
In the mean time, please open the mortgage pension withdrawal to PR holders….
Pensions are a scam period! Instead, there should be a bank account we can’t take from til we retire. That way we won’t lose so much besides the monthly fees. It’s not right we work so hard and our money is being gambled with practically.
you money loses purchasing power every year to inflation so having it sit in an account collecting peanuts is just as bad. Bo Miller had a great idea to have a national fund that would invest in building/renting properties to locals to generate income.
If you can beat 6.37& to 24.17% for the last year with a bank account, please let me know where you bank.
There are many pensioners still paying mortgages or rent, utilities and food, as well as rising health costs. Money is spent keeping the roof over their head. No chance.
Thank you to our great and thoughtful leaders!
My fund lost so much money. I am assured that averaged over several years, it more than made up for the losses. Sadly, I am adept in mathematics. The administrators of the pension scheme should have been paid on commission — when we made money, they made money.
We have been forced to pay into a fund that has left many or most of us with a meager retirement of bare subsistence. But wait, there’s hope! If there isn’t too much in your pension fund, it will run out and then you will qualify for NAU!!
Oh glory!
Lobby to amend the Law!
You (Cayman citizens) voted for them – elect better Ministers!
No Cayman pension fund has lost money over any period of 5+ years. Some may lose for one year if the markets drop (some did in 2022, for example), but over a period of time (and your pension is for the long term) all make solid returns.
what are the plans for senior citizens that no longer have a pension?
Nothing! Remember where you are and who’s running the country. Welfare country now and all of us have to pay for it that actually contributes to this country.
Good news everybody. My pension is valued at over 1.5 MILLION and yet I can only access a thousand a month.
The pension accompany shills will be claiming that my pension was merely a “last resort meant to top up other retirement funds” whilst taking their yearly percentages for doing jack shit.
Based on last year’s DLP guidance at https://www.gov.ky/publication-detail/guidance-note, a 65-year-old with a pension valued at 1.5 million could withdraw 76650 for the year. The $14125 (now $15000) this is talking about seems to be if the percentage withdrawal allowed would otherwise be lower.
The bigger issue here is that someone relying on that exception is going to run out of money during their lifetime. People just can’t save enough money to fund their retirement.
Aaah..this makes total sense. Broadly one can withdraw around 4-5% at retirement, increasing as you age. The $15k is, as you said, an exception, and also means people will deplete their funds
Thank you.
Party at The Pines tonight bobo!
The good news is that you will have another 100 years of pension payments. Oh – no actually you wont, because once they have finished charging administration fees every year and making woefully bad investments, the funds will run out way before that. Meantime you could take the funds out and get 5% on them in a simple term deposit – $75K or 5 times what these vultures will give you, or over $60K in an annuity for life – but hey, you are not to be trusted with your own money. Actually its not your money anyway – its not there to feed you and pay your medical bills, its to subsidize our local pension providers. And the politicians do nothing – they have their own tax payer funded pensions.
Which term deposit with which bank is paying 5%?
probably some crypto bank.
Money Market accounts everywhere are just a tad under. Just look and get informed. Don’t depend on others, have some self-responsibility.
You can get over 10% with a ‘bond’ Fidelity/RF Group is advertising to their pension group.
Dig deeper. It’s a Debenture (no guarantee of principal repayment) & not
Liquid. Must be held 30+ months before you can cash it in. Beware high rates if you can’t also take high risks.
The government should not be controlling private pensions period.
Exactly, it has nothing to do with them morons who have given themselves increases for years! Which one of them contributed to our private pensions to dictate and have any control.
Absolutely!
This should be challenged in the courts, but the government know pensioners can’t afford legal representation.
Adding a few more sardines and crackers on the table.
$1,250 per month. my goodness, those retirees must be besides themselves on where to spend all that money.
A few loaves of bread, a few gallons of milk, a bag of rice, a bit of fruit, fill up the car with gas, and you might have $12.37 left over.
Can’t tell if this story is from The Onion or not, or possibly a late April 1st press release. Utter clowns.
Here in the Caymans it’s known as De Hunion
I think you might be looking for “The Jamaicas”.
Same dog puppy