Although it generally supports proposed changes to the Cayman Islands National Pensions Law, the largest organisation representing local businesses said last month that it believes certain questions must be answered before lawmakers pass and implement those amendments.
The main question, according to Chamber of Commerce President David Kirkaldy, is how much Cayman Islands workers will need to retire comfortably.
“If we fail to fund pensions sufficiently, then the result will be an ever increasing taxation to fund social service payments to the needy in our society,” Mr. Kirkaldy wrote in a 29 June letter to Employment Minister Rolston Anglin. “It is estimated at least 25 per cent of the Caymanian population (8,000 persons) receives some form of government-funded assistance at an annual cost of
approximately $60 million.”
Those figures were revealed in mid-2011 by government Community Affairs Minister Mike Adam, who told an audience in George Town that the Department of Children and Family Services had provided at least some assistance to about 8,000 people during 2010.
“This department alone assisted almost 8,000 persons with some form of financial assistance,” Mr. Adam told a crowd of more than 200 United Democratic Party supporters in May 2011. “This included food vouchers, rental assistance, school uniforms, school meals for children, medical expense for travel and many, many other areas.”
Mr. Adam indicated that social troubles worsened during the prolonged economic downturn that began affecting Cayman in 2009.
Mr. Kirkaldy wrote in his letter to Mr. Anglin that such issues would have “long term national
financial consequences and impact the national budget”.
“We must first agree on the ultimate national pension objectives and address the following questions: What percentage of final earnings will the retiree need in retirement to fund their lifestyle? Given the current returns on investment and operating expenses, what is the required contribution level?” More than five years ago, a report from the Mercer Human Resource Consulting firm recommended an increase to what was being paid into private sector retirement funds.
The Mercer report noted that the private sector pension system might not provide adequate resources in retirement for plan participants, who in some cases would be left with one-fourth of their pre-retirement earnings. That 25 per cent of previous earnings simply would not be enough for an individual to survive without some public assistance, the firm opined.
“Based on current economic expectations, the minimum (defined) contribution rate of 10 per cent (5 per cent from employees, and 5 per cent from their company) is not projected to provide adequate retirement income security,” the 2007 report read.
Private sector workers in the Cayman Islands may increase their contributions into their respective retirement funds if they wish, but there is no requirement for them to do so.
Mr. Kirkaldy also urged greater compliance with the National Pensions Law, something the revised bill would seek to accomplish partly by allowing the Labour and Pensions office to levy direct fines against employers who don’t pay employee pensions.
“It is unfair and unreasonable for those law-abiding firms to compete against unscrupulous employers who are flagrantly contravening the pensions law,” he said.
The 2007 Mercer report did caution government that fines and sanctions against private sector non-compliers would only be effective “to the extent there is sufficient political, judicial and regulatory will to impose them.”