Cayman Islands Pension Regulations

Cayman’s pension laws have changed over time and some of the rules have been welcomed and some have not.

Unlike countries like the US or the UK, Cayman’s system is privately funded but government-mandated, rather than relying on government-collected contributions.

Important Cayman Islands Pension Rules

1. Normal Retirement Age

Normal retirement age is 65 years old. Employees turning 60 between 1st January 2017 and 31st December 2029 can claim benefits at age 60. Early retirement is allowed from age 55. Age 60 is not a mandatory retirement age, it is simply the earliest age for claiming benefits under certain conditions.

2. Maximum Pensionable Earnings

Maximum pensionable earnings refer to the upper limit of an employee’s gross income upon which pension contributions are calculated. In the Cayman Islands, maximum pensionable earnings are CI$87,000. Some employers calculate contributions on your full salary, so make sure to ask.

3. Foreign Workers Must Wait Two Years for Benefits

Foreign workers leaving the Cayman Islands must wait two years before transferring pension benefits to an established plan in their home country. Employment must have ceased, employee must be terminated from employer's plan, reside outside of the Cayman Islands and have made no contributions for at leas two years. If no registered pension providers exist in a worker’s home country, contributions can remain in the Cayman Islands until retirement, when benefits can be claimed.

4. Mandatory Participation for Employers and Employees

All employees age 18-65 must be enrolled in a pension plan. There are only two exceptions: 1). Caymanians under age 23 in full-time education, and 2). non-permanent resident household domestic workers. It is also mandatory that self-employed people contribute 10% of their earnings to a pension plan.

5. Minimum Contributions

All employees must contribute up to 5% of earnings, while employers must contribute at least 5%. Additional contributions by the employee are considered Additional Voluntary Contributions (AVCs) unless otherwise stated.

6. Accessing Additional Voluntary Contributions (AVCs)

AVCs are extra contributions above the mandatory minimum. Employees can access AVCs before reaching the normal age of pension entitlement for:

• Housing (purchasing a home or land, constructing a home, or mortgage repayments)
• Medical expenses (non-elective treatment only)
• Temporary unemployment (6 months maximum)
• Education (full-time schooling for their child)

7. Non Compliance Penalties

Employers who fail to pay pension contributions or make late payments face fines and/or imprisonment. The administration of an unregistered pension plan may result in a CI$10,000 fine or one year in prison.

8. Mandatory Record Keeping

All employers must maintain payroll accounts and records of all sums paid to an employee’s pension plan for a minimum of five years.

9. Employee Awareness

All employers must provide employees with clear information about their pension plans. Failure to comply can result in a fine up to CI$10,000. Employees may also get detailed information from their registered pension provider.

For more information about Cayman’s Pension Law and the recent changes that may affect your retirement plan, contact the Department of Labour & Pensions (Tel: (345) 945 8960) or speak to your registered pension provider.