Pension payouts under the new law

I’m writing to you to ask about the new pension law in regards to people getting their money when they leave the island. Up to this point, when people left the island, if they had $5K or less they were able to get their money in six months, and for over $5K the wait was two years. From what I understand, the new law will discontinue that process. Does the new law affect everyone who was on island prior to the effective date of the new law? For example, if someone has been here for seven years now and was expecting another two years on island before heading home, will they now have to leave the island before the effective date of the new law to ensure that they will be able to get their money and not need to wait until they’re 65?

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Auntie’s answer: Basically, the answer to your question is that in order to get your hands on all the money in your pension plan before retirement age, you must stop working in the Cayman Islands by the end of the year, but you don’t necessarily have to leave right away — at least not under the pensions law.

An official from the Department of Labour and Pensions took the time to explain the National Pensions (Amendment) Law, 2016 as it pertains to your question.

First of all, for amounts of $5,000 or less, the law remains the same, which means the pension administrator still has discretion to provide a refund.

As the law currently stands, if you have more than $5,000 in your pension plan, you don’t have to be off island for two years or more to get the refund. In order to do so, there are three requirements:

1. you must have ceased employment;
2. you must cease to reside in the Cayman Islands (which is defined as being off island for at least six months);
3. there must be no contributions to your pension account for two years.

If all three of these conditions are met, then you may apply for a refund. The official advised that you should see your pension administrator to get the appropriate form, a list of the required documents and the timing involved with the application in order to facilitate the refund. It is recommended that you start this process well in advance of needing to get the refund to ensure that you can get all the correct documentation.

But all this will change in two years.

Under the National Pensions (Amendment) Law, 2016, refunds will not be allowed after 31 December 2019. In order to fulfill all of the requirements to get a refund in December 2019, the two-year window for contributions ends on 31 December 2017, the official said. Therefore, if a person intends to continue working in the Cayman Islands after that date, they would not qualify for a refund.

The law sets out one other option, which is based on the employee’s age as of 1 January 2017 and the date when he or she chooses retirement or “pension entitlement”.

The official explained that if you are between the ages of 48 and 60 this year, you can opt for either early retirement at 50-59 or regular retirement at 60. However, either way you won’t get a full payment in one lump as your pension benefit will be paid out over a phased period.

Anyone who is 47 or younger this year can apply for early retirement at age 55 or at normal retirement age, which would then be 65, with the same phased payment process.

The law mentioned in this column can be found on the CNS Library

Tags: Department of Labour and Pensions, National Pensions Law, Pension entitlement, Retirement age

Category: Ask Auntie, Pension Questions