Elimination of work permit holders’ pension contributions will cause higher plan costs
Silver Thatch Pensions is one of the largest pension plans in the Cayman Islands. The other is The Chamber Pension Plan that is affiliated with the Cayman Islands Chamber of Commerce.
At Premier McKeeva Bush’s Public Meeting on the Budget proposals last Wednesday (8) he announced a proposal that businesses who are currently required to contribute 10 per cent of a work permit employee’s salary (matching 5% from the employee, 5% from the employer) to a retirement plan would no longer be required to do so.
Both Silver Thatch and The Chamber said the potential removal of work permit employee contributions from those funds would lead to higher costs for plan administrators and lower returns for workers investing for retirement.
In a statement issued on behalf of Silver Thatch Pensions by their Board’s Deputy Chairman, Charles Farrington, he said, ““Immediately most, if not all plans, would regress from growing through contributions, to shrinking, as monthly contributions suffer a substantial reductions due to the shut off of expatriate contributions.”
He further said that employees on work permits who have left the Cayman Islands would likely continue to make withdrawals from the funds as normal, while at the same time fewer contributions would come in each month.
“All of this would translate into much higher per unit costs for the plans – that is – lower returns for the members,” Farrington said. “At some point the plans would presumably return to growth again but it could be many years.”
A statement from the Chamber Plan said, “Unless the government is saying work permit holders will never have the right to retire here, why would they allow or encourage those employees to liquidate their pension savings? If it made sense to encourage saving for retirement yesterday, it should still make sense tomorrow.”
It would seem, not unsurprisingly, Government did not consult either of the two leading pension providers on the island before making their announcement.
Perhaps there wasn’t time and would it have made any difference?
