Cayman’s pensions ‘inadequate for most workers’

Cayman’s pension plans are “inadequate for most workers,” including civil servants, the Islands’ public-sector pensions chief has warned.

Jewel Evans Lindsey is advocating for a new national framework on pensions and a shift in mindset towards retirement savings.

The Compass reported last month that the Islands are facing a looming crisis, with many workers, particularly in the private sector, reaching retirement age without sufficient funds to cover their golden years.

Evans Lindsey, CEO of the Public Service Pensions Board, expressed similar concerns for employees in the public sector, despite a higher contribution rate and a more generous plan design.

She said workers need alternative income streams or additional savings and cannot rely only on their pensions to retire comfortably on the island.

“If the public plan does not support retirement adequately on its own, then this means that private-sector pensions are even more unlikely to produce an adequate pension, and that private sector employees will need to rely more heavily on other sources of income during retirement,” she said.

Government is currently seeking a consultant to carry out an actuarial study and provide policy options, according to Employment Minister Michael Myles.

Private-sector pension managers told the Compass that mandatory contributions from employers and employees will likely need to increase significantly from the current 10%. They would also like to see investment rules relaxed to give them more flexibility to get better returns.

Any increase in contributions would come with cost-of-living implications, through higher costs for employers and lower take-home pay for workers.

‘National framework needed’

Evans Lindsey cautions that increasing contributions is not necessarily the ‘best first approach’ and argues for a more fundamental shift.

“As a responsible society, I think we must actively and responsibly progress the broader conversation of pension reform.

“In terms of how we approach this, I believe there are highly achievable ‘low-hanging fruit’ opportunities, but they come from creating consistency in how we provide pensions across the public sector and bringing the private sectors into closer alignment with those standards,” she said in written responses to questions from the Compass.

“This is why I see the biggest issue to address as one I have previously, and always will, advocate for: a comprehensive, national pension framework that encompasses all working citizens, rather than public servants alone. It is encouraging that there might be momentum to explore this further.”

She said consistent national standards would help workers who change careers and move between employers.

“What is most important is a level standard for everyone in this country. Right now, there are gaps. No one disagrees with that, and frankly, that reality is not isolated to the Cayman Islands.”

She also suggested her organisation was “ideally equipped” to support and facilitate the change.

“While the PSPB plan is not perfect, I believe that the PSPB is the benchmark in this country and could provide a path to deliver a national pension framework benefiting the private sector as well.”

Personal responsibility

She added that workers must also take responsibility for their own retirement.

“It is a misconception that individuals bear no responsibility for their own retirement security,” she said.

“Without personal preparation, some degree of financial deficiency is inevitable, and our most vulnerable elderly citizens are forced to either live below acceptable standards or heavily burden the public purse, effectively transferring a systemic debt to future generations.”

She called for pension education for all Caymanians. She said employment pensions should provide “a structurally adequate basic income that individuals can supplement through personal savings.”

“Retirement security must be viewed entirely as a shared partnership.”

Still, she said no one who served the country should end up relying on welfare.

“My life’s work over the past three decades has been driven by the conviction that Financial Assistance should never be a necessity for those who dedicated their careers to public service, as they are the nation-builders whose dedication is what made this country’s success possible,” she said.

“Similarly, those retiring after careers in the private sector should also be able to retire with dignity.”

Asked about the long-standing concern that government lacks the money to cover its future obligations to retiring public servants, Evans Lindsey said the Public Service Pension Plan is now “in a strong and healthy funding position.”

“While most government schemes internationally operate on a pay-as-you-go basis, our funded model establishes the Cayman Islands public sector as a strong benchmark for pension sustainability.”

She acknowledged that recent actuarial valuations show an underfunded portion.

She said public pensions have statutory and constitutional safety nets that require government, as the plan’s principal sponsor, to cover that shortfall and that government has been paying it down over time.

“Let’s be clear, this does not imply any short-term risk and has never been about the security of paying future benefits or fulfilling our retirement obligations to our plan members,” she added.