Effective from 1
June 1998 employers were required to provide all their employees,
with a few notable exceptions, with pension benefits. The requirement
was mandated by the National Pensions Law 1996 as amended by
the National Pensions (Amendment) Law, 1998 and revised and
consolidated by the National Pensions Law (1998 Revision) (the "Law").
Self-employed individuals are also required to make provisions
for a pension.
The benefits of any pension plan must be in accordance with those stipulated
by the Law and the pension plan itself must be registered in accordance with
the Law.
Defined Benefits vs. Defined Contribution
There are two typical forms of pension benefits. Those
that are defined benefits, or those that are defined contributions. Defined benefit
plans promise to pay a fixed benefit to you upon your retirement and is usually
proportionate to your years of service and your income during that period. Defined
contribution pension plans pay benefits solely based upon payments (contributions)
into the fund plus the investment earnings on those contributions. The Silver
Thatch Pension Plan is a defined contribution pension plan.
Contributions
The National Pensions Law requires that contributions
are paid to a registered pension plan based, typically, on an amount equal to
10% of your earnings. Of that 10%, your employer will pay 5% and deduct a matching
5% from your wages up to a maximum pensionable salary of $60,000 (CI Dollars).
All money that your employer deducts or is obligated to match, must be paid to
a pension plan by the 15th day of the month following the deduction. If your
contributions are not paid within that time frame then your employer will be
required to pay interest on those late contributions at an annualised rate of
the Cayman Islands prime lending rate plus 5%.
In addition to the mandatory contributions, you are able to make additional voluntary
contributions from time to time. Contributions can be paid in either Cayman Islands
dollars or US dollars. Contributions received in Cayman Islands dollars will
be converted to US dollars in order to purchase units in the Pension Plan. Currently
the conversion is exchanged at the mid-market rate of 0.83 and no commissions
are made on conversion of the money.
Calculation of Contribution
Contributions
are calculated as a percentage of your earnings. Earnings
are defined in the law. Your employer agreed, on joining
the Pension Plan, to calculate the amounts payable in contributions
to the trustee.
You can not be required to contribute more
than 5% of your earnings, and with one exception, your employer
may not contribute less than 5% of your earnings to the Pension
Plan.
The Pension Plan does allow contributions to be made at a lesser
rate in accordance with regulations produced by the government.
If your employer contributes an amount which is more than 5%
of your earnings to the Pension Plan, you will only be required
to contribute an amount which when added to the employer contribution
will equal 10% of your earnings (for example; Your employer pays
7%, and you pay 3%)
The Law may change the level of employee contributions however,
we will keep you informed of any changes.
Application of Contributions
Once contributions are received in cleared funds they will be
used to purchase units in the Pension Plan, which will be registered
in your name. The number of units that are purchased depends
upon the price of the units as of the contribution date.
Contributions received in cleared funds by mid-day at least
three business days before the date on which the price of units
is calculated will be applied at that time in the purchase of
units. If contributions are not received on a timely basis they
will be held until the next time units are priced.
The contribution date is on the first business day of each month.
The price of units is calculated by obtaining the value of the
investments of the Pension Plan from the custodian, deducting
the costs and expenses (including the remuneration of the administrative
services agent and investment manager) and dividing the net amount
by the number of units which are already in issue. This gives
a price per unit. Your contributions will be used to purchase
as many units as possible at this price.
The price of units will vary from time to time depending on the
value of the underlying investments of the Pension Plan and you
will not therefore always receive the same number of units each
month for your contributions.
Voluntary
Contributions
In addition to the mandatory contributions, you are able to
make additional contributions from your salary if you wish.
You cannot cash in units purchased with additional contributions
except on retirement or as otherwise permitted under the Pension
Plan.
Documents and
Information Available
The Law does give you certain rights to information and documents relating to
the Pension Plan.
You should receive from your employer or directly from the administrative services
agent, within 30 days of beginning work, a copy of a booklet explaining the provisions
of the plan and your rights and obligations under the Pension Plan.
You will also receive an annual statement from the administrative services agent
setting out certain details relating to your membership of the Pension Plan as
required by the Law.
