The Cayman Islands are different from other jurisdictions when it comes to pensions. There are two pension sectors in Cayman, privately funded pension plans and Government funded pension plans for civil servants (see Government Pensions for information on Government funded pension plans).
The private sector pension plans are funded by employees and employers but are Government-mandated. The National Pensions Act requires both employees and employers to contribute a total of 10% of the employee’s monthly earnings to an approved pension plan. The law states that employers must contribute a minimum of 5% and employees must contribute a maximum of 5%. Those who are self-employed are required to contribute 10% of their earnings to a pension plan.
National Pensions (Ammendment) Law 2016
In May 2016, the National Pensions (amendment) Act 2016 was passed with over 50 provisions revised. A few of those changes to the Pension Act include:
- Adjusting the normal age of entitlement from 60 to 65 for those who are 47 and younger as of 1st January 2017. Those who were 48 and older as of 1st January 2017 may still retire at 60 (early retirement at 50).
- Raising the maximum annual pensionable earnings from CI$60,000 to CI$87,000.
- Accessing voluntary contributions for housing, medical, educational and unemployment purposes.
- Non-compliance from employers can result in fines up to CI$10,000 and possible imprisonment.
Under the National Pensions (amendment) Act 2016, the way members can access their funds when they terminate employment on Island has also changed. Effective from 31st December 2017, a member who has CI$5K or more in their account may elect to transfer the balance of the pension assets to a pension plan, pension entitlement savings arrangement, or life annuity that is outside of the Cayman Islands. Prior to completing the transfer, a member must cease employment on island; make no contributions to the pension plan; and not reside on the Island for two years.
The amendment also stipulates that members will no longer be able to request a lump sum payout after December 30th 2019. After which, refunds will only be available to members under two conditions:
a) the total value of the pension fund is less than CI$5,000 (this is also done at the administrators discretion)
b) if a member reached the age of 65 and is unable to transfer their pension benefit to an approved pension plan, life annuity, or similar arrangement.
COVID-19: Changes to the National Pensions Law
In April 2020, an amendment to the National Pensions Act was passed that enabled workers to access their private pension funds up to a certain amount to assist those who had been financially impacted by the COVID-19 pandemic. The scheme was open to both Caymanians and non-Caymanians, as well as those who were self-employed.
Under the emergency-withdrawal scheme, private pension members could withdraw from their accounts 100% of their pension funds not exceeding CI$10,000 and 25% of funds in excess of CI$10,000. Those who left the Island after 1st February 2020 were also allowed to withdraw funds from their pensions. Public servants have not been granted access to their government pensions. This scheme ended on 31st October 2020 by which time 43,000 applications had removed CI$489.3 million from their pensions. For more information on the National Pension (Amendment) Act 2020 and a list of Notary Publics, please see this page.
The Government also implemented a ‘pension holiday’ retroactively from 1st April 2020 that was extended a number of times but expired on 30th September 2022. It allowed both employees and employers to opt out of pension contributions for the duration.
While the pension withdrawal scheme has been incredibly helpful for those who had their livelihood impacted by COVID-19, some Government MLAs have voiced their concern that it will have a significant knock-on effect some years down the line. In August 2022, it was announced that employees in the private sector would need to increase the payments made into their pension funds due to the current legal amount being insufficient. The withdrawals made during the COVID-19 lockdown and the freeze on mandatory payments have also heightened this issue. The current contribution of 10%, paid between employers and staff, is thought to increase through 0.5% annual increments until the mandatory amount reaches 15% of the employee’s salary. However, these suggested changes have not yet been confirmed by the PACT government and if implemented will not start until 2024.
Generally, should you choose to leave the Cayman Islands and the total value of your pension assets are less that CI$5,000, you may request to have your funds paid out to you and this is usually available six to eight weeks after your last contribution has been received by the pension provider.
If you have a query regarding the new Pension Act, call the Department of Labour and Pensions at (345) 945 8960 or visit www.dlp.gov.ky.