OCC issues scathing report into private sector pensions

Nicola Williams, Commissioner from The Office of the Complaints Commissioner (OCC) has issued a scathing report into private sector pensions last Wednesday (9). The Report follows an Own Motion Investigation into the ability of the National Pensions Office to effectively investigate, charge and convict companies who are non-compliant with pension contributions as mandated under the Pensions Law that was initially launched back in January of 2010.

Here is the complete statement:

On 29 January 2010 I, as Complaints Commissioner, launched an investigation into the ability of the National Pensions Office to effectively investigate, charge and convict companies who are non-compliant with pension contributions as mandated under the Pensions Law that was initially launched back in January of 2010.  The decision to do so was in accordance with my powers under S.11 (1) of the Complaints Commissioner Law 2006, as I had determined that there were reasons of special importance, which made this investigation by my Office desirable in the public interest.  These arose from the plight of working men and women who every month have funds deducted from their pay cheques thinking that these monies are being contributed to a pension plan which will help provide for themselves and their families in retirement, only to discover that it was used in some other way, or, in some cases, stolen from them by dishonest employers who never had any intention of paying it into a pension fund as required by law.

In September 2010, an extensive OCC Report was published, detailing a number of findings and making a total of 21 Recommendations. To date, only 10 have been substantially complied with; 11 remain outstanding more than 3 years post Report.

Pension Delinquencies

In January 2010, when the investigation formally began, 670 businesses were delinquent with their pension payments to employees — a figure obtained from the National Pensions Office itself. The OCC Report then described this situation as “….a ticking time-bomb for the people of the Cayman Islands.”

However, the position has since worsened exponentially.

The duty of the OCC is to be transparent as well as confidential. Indeed, the Deputy Governor has recently gone on record as stating that the Cayman Islands has “an open government”.  There is, however, a constant balancing act between the two, the concern being always what is in the best interest of the public.

I have been made aware of information concerning the level of private sector delinquencies which I believe would be subject to disclosure under the Freedom of Information Law. For reasons of confidentiality, I am not prepared to state a precise dollar value; to name the pension funds concerned; or the businesses involved. However, for reasons of transparency and in keeping with the OCC mandate to monitor our Recommendations for non-compliance, as of June 2013,

*    the number of delinquent companies had increased by 70.7% since January 2010;

*    the level of delinquencies amount to tens of millions of dollars;

*    some businesses that were put on a payment plan to clear their pension arrears are delinquent on these plans, amounting to millions of dollars.

This level of delinquency affects thousands of people — Caymanian and non-Caymanian alike.

In these very difficult economic times it also unfairly disadvantages the honest employer who is paying pension contributions in accordance with the Law. Many non-compliant businesses deduct money from their employees’ salaries and delay paying pensions — if they pay them at all — because they know it will be a long time before detection or any likely prosecution. In the meantime, the unpaid pensions dishonestly retained go to increase their bottom line.

Even those whose pensions are properly collected and paid into a pension fund are indirectly adversely affected, as delinquencies lower the overall value of the pension pot, and the interest generated thereon, meaning lower payouts across the board on retirement.

This is a national crisis which should concern all of us, as many people about to retire will find that they have insufficient funds on which to live, and will have to rely on social services or other financial relief provided by the government, which are already stretched to breaking point. Consequently, this is not only a problem for the Department of Labour and Pensions, but for the Ministry, and Government as a whole.

Outstanding Recommendations

As long as Recommendations remain outstanding, I consider the Ministry to be non-compliant.

Of the outstanding 11 recommendations, it is the Ministry view that 7 of them would be cured by the proposed National Pensions Bill. However, this legislation was to have been passed in 2010. Although the issue of pensions was mentioned in the Throne Speech on Monday 7 October, it is not clear exactly when this will be laid before the Legislative Assembly for debate. In light of the inability to bring this legislation before the Legislative Assembly in the preceeding 3 years, the OCC is not optimistic that this will be done in a timely fashion.

Meanwhile the situation is worsening, as every week, people who have worked all their lives and had pensions deductions made for decades are retiring – into unexpected, and unplanned, poverty.

Nicola Williams,

Cayman Islands Complaints Commissioner

To download the 2010 Own Motion Investigation by the OCC September 2010 mentioned in the above release go to: http://www.occ.gov.ky/pls/portal/docs/PAGE/OCCHOME/PUBLICATIONS/OMIREPORT/OCC%20OMI%20REPORT%20PENNY%20PINCHING%20PENSIONS.PDF

In the aforementioned publication Williams reports on the National Pension Office (NPO):

“The NPO operates with a staff complement comprised of 1 Superintendent of Pensions (a position that was vacated in September of 2009 and remains unfulfilled to date); 1 Deputy Superintendent (currently Amy Welliston who is also Acting in the role or Superintendent of Pensions); 2 Pension Inspectors with an offer just recently made to fill  the third position in July  2010;  I  Finance & Administrative Officer; and 1 Receptionist/Executive Officer.

“As can be seen from the organizational chart, the full staff’ Complement should be seven persons. The current staff complement is six; and up to the end of June 20th it was five, with only two Inspectors.

“The situation worsened after the Government moratorium on recruitment across the Civil Service came into effect. As a result, the contract of one of the remaining two Inspectors was not renewed on expiry. The NPO operated at one third of its Inspector staff complement, with only one Inspector in place dealing with over 600 businesses reported as non-compliant until 2009, when a second inspector was hired. A third was hired in July 2010.”