CITA PRESENTATION Commencement of National Pensions (Amendment) - PowerPoint PPT Presentation

CITA PRESENTATION Commencement of National Pensions (Amendment) Bill, 2016 13 December, 2016 1

COMMENCEMENT OF NATIONAL PENSIONS (AMENDMENT) LAW 2016  The National Pensions Law (“NPL”)  Governs private sector pension funds - was initially implemented in 1998.  Public Service falls under separate legislation  The National Pensions (Amendment) Law 2016 was passed in the Legislative Assembly in May 2016 and gazetted in June 2016. 2

COMMENCEMENT OF NATIONAL PENSIONS (AMENDMENT) LAW 2016  Key Objectives:  To remove the notion of a ‘normal retirement age’ and to increase the age at which persons become entitled to access their pension from 60 to 65, recognizing the longevity of people in today’s society;  To introduce more requirements for pension plans to educate and inform members;  To introduce new and enhanced mechanisms to improve compliance with the National Pensions Law;  To align the National Pensions Law with the re-organisation of Labour and Pensions Services in the Cayman Islands, by including in legislation the establishment of the DLP . 3

COMMENCEMENT OF NATIONAL PENSIONS (AMENDMENT) LAW 2016  Section 1(2) of the Amendment requires Cabinet to issue an Order to bring the various provisions of the Amendment into effect. – issued 2 December 2016  Implementation Dates:  The National Pensions (Amendment) Law 2016 will come into effect on the 31 st December 2016 with the change of terminology from references of “Governor” to “Cabinet” 4

COMMENCEMENT OF NATIONAL PENSIONS (AMENDMENT) LAW 2016  Jan 1 2017:  Normal Age of Pension Entitlement (commonly referred to “normal retirement age”) increases from 60 to 65;  A person may opt for the normal age of pension entitlement of 60 years of age if that person attains 60 years of age between 1 st January 2017 and 31 st December 2029. (48 to 60 in 2017);  Persons presently 47 years old and younger will automatically fall under the new Amendment Law 5

COMMENCEMENT OF NATIONAL PENSIONS (AMENDMENT) LAW 2016  Jan 1 2017 (cont’d)  Year’s Maximum Pensionable Earnings:  The amount on which pension contributions must be paid by both the employer and employee  Current: CI$60,000  New Amount: CI$87,000 6

COMMENCEMENT OF NATIONAL PENSIONS (AMENDMENT) LAW 2016  Feb 1 2017:  Increase in fines throughout the National Pensions Law  Fine amount is determined by the Judiciary  Establish the ability to collaborate with other departments  March 1 2017:  Definition of “employee” changes  Caymanians that are under the age of 23 and in full time education will no longer be pensionable 7

COMMENCEMENT OF NATIONAL PENSIONS (AMENDMENT) LAW 2016  March 1 2017(cont’d):  Definition of “household domestic” will come into effect which is drawn from the Labour Law  Maids and gardeners working in a private home will no longer be pensionable 8

COMMENCEMENT OF NATIONAL PENSIONS (AMENDMENT) LAW 2016  March 1 2017(cont’d):  Section 18A: Employers will be required to maintain records  Records will need to be retained for five years  Examples:  Employment dates for all pensionable employees  All deductions from employees’ earnings  All contributions made by employers  Dates that contributions were paid 9

COMMENCEMENT OF NATIONAL PENSIONS (AMENDMENT) LAW 2016  March 31 2017:  Section 47: Access to Additional Voluntary Contributions:  Housing  Medical expenses  Temporary unemployment  Educational needs 10

COMMENCEMENT OF NATIONAL PENSIONS (AMENDMENT) LAW 2016  December 31 2017:  Section 34: Transfers:  Expansion of requirements:  Employment Terminated (only current requirement)  No contributions for 2 years  Cease to be resident for 2 years 11

COMMENCEMENT OF NATIONAL PENSIONS (AMENDMENT) LAW 2016  December 31 2019:  Section 53: Refunds:  Current criteria:  Employment Terminated  No contributions for 2 years  Cease to be resident for 6 months  Allows persons considering refunds the time to decide and their employers’ time to plan  As at this date, refunds will no longer be permitted  To obtain a refund prior to December 31 2019, all three criteria must be met.  Contributions must cease by December 30 2017 12

COMMENCEMENT OF NATIONAL PENSIONS (AMENDMENT) LAW 2016  Other Amendments not yet coming into effect:  Section 16(4)(h): Annual General Meetings  Section 16 (4)(j): Publication of Returns and Expense Ratios  Section 22: Increase Statement Frequency from Annually to Semi Annually  Section 25 (1)(a): Reduction of the initial employment period from 9 months to 6 months 13

RSA DRAWDOWN SCHEDULE  Retirement Savings Arrangements (“RSA”) serve as the vehicle for members to transfer their account balances to instead of purchasing an annuity.  Current policy: $12,000/year with some indexation in later years  Current Issues:  The annual amount does not take into consideration any other factors such as age or account value  For members with larger balances, the current policy hinders their ability to access their pension assets 14

RSA DRAWDOWN SCHEDULE  The New Schedule was developed by Morneau Shepell and takes into consideration a variety of factors including:  Demographic profile of future retirees  Maturity of the RSA framework  The future investment returns on the pension funds  Current and projected account balances  Impact of inflation on future cost of living  Cayman Islands mortality experience  Spending and consumption rates of retirees  Comparison with best practice from other jurisdictions where such factors are in use 15

RSA DRAWDOWN SCHEDULE  Recommended New Schedule:  Effective 9 January 2017  New minimum threshold  $12,480 to increase in line with inflation  Introduction of minimum and maximum percentages based on age and account value 16

RSA DRAWDOWN SCHEDULE  Persons with larger amounts will be able to withdraw an increasing amount on a yearly basis above the proposed CI$12,480 threshold  Those who may not have accumulated sufficient funds to withdraw above the stated maximum annual threshold, the schedule now accounts for the need to adjust that figure upwards as necessary to adjust for inflation. 17

COMMENCEMENT OF NATIONAL PENSIONS (AMENDMENT) LAW 2016  For further information, please see the Department of Labour & Pensions website, www.dlp.gov.ky for copies of recent comprehensive press releases and copies of the National Pensions (Amendment) Law, 2016 18