Proposed legislation could mean pension plan members may have to wait longer before they are eligible to receive benefits
The National Pensions Bill 2012, announced on May 28, 2012, aims to reform the existing National Pensions Law created in 1998. The bill’s key driver is to give regulators more tools to deal with non-compliant employers – as many as 600+ who are behind in their required contributions to pension plans, including the Silver Thatch Pension Plan and other similar plans.
Notably, the bill also proposes to raise the pensionable age – age at which members are normally eligible to receive pension benefits – to age 65 from its current age 65.
To enhance the process of monitoring and enforcing pension contributions, and improve the regulation of pension plans and pension plan administrators, the bill would reassign management of the new legislation to the Cayman Island Monetary Authority and the new Department of Labour and Pensions. Currently, the National Pensions Office is responsible for the existing legislation.
The bill also aims for greater transparency and increased disclosure to ensure that members are better informed about their pension arrangements. Proposed additions include a legal requirement for annual general meetings and for quarterly statements of pension benefits to be issued. As you may know, this is already the practice of Silver Thatch Pensions. There is also a new requirement that information regarding pension fund performance be made available to employees enrolling in a plan – this information is currently available from Silver Thatch pensions through the client services agent.
What this means for you
The National Pensions Bill 2012 does not affect the existing minimum 10% combined contribution rate for employers and employees.
If passed into legislation, however, age requirements can be expected to change for both normal and early retirement. In addition to delaying the pensionable age to 65 (currently age 65), the bill would raise the early retirement age to 55 (currently age 55). This means that if you retire from work before you turn age 55, you will be eligible to receive retirement benefits starting at age 55. If you go back to work before you turn age 65, your benefits will be postponed until you either retire again or reach age 65. While for some this may mean working a little longer, this arrangement will ensure that more is contributed to your pension. While the choice is yours to decide when it’s right for you to retire, making contributions into your pension fund for a longer period of time may help to put you in a better financial position in the long run – especially considering people are now living longer on average and therefore pension benefits need to be stretched over a longer payout period.
The new bill also proposes a fixed penalty system for non-compliant employers with stiffer fines and better protection for employees who report them. By cracking down on employers who aren’t doing their part and by protecting the employees that bring these violations to light, it will help ensure that money is being put where it belongs – in a pension fund intended to help employees save for retirement.
There is no specific timetable for final passage of the bill, or when it is proposed to be in effect.
Below is a comparative table outlining the key differences between the current law and the proposed legislation:
