Private pensioners could receive more cash: Cayman News Agency

(CNS): Residents living on private sector pensions will have slightly more of their own money this year after the Ministry of Labour, in consultation with the National Pensions Board, approved an increase in the 2024 Retirement Savings Arrangement (RSA) payout amount from CI$14,125 (the current maximum annual payout) to CI$15,000, effective June 1.

No matter how much pension people have accumulated through their own and their employer’s mandatory contributions, the law limits how much they can withdraw from it each year, a figure that is increasingly unrealistic.

This year’s increase is 6.2% higher than in 2023, based on the inflation rate in 2023, and Labor and Pensions Director Bennard Ebanks said the new amount is reasonable.

The Public Service Pension Board announced earlier this week that retired public servants and those over 65 receiving a public service pension will see their pensions increase by 3.8 per cent this year. Ebanks said the increase in private pensions will make pensions more equitable between retired public and private sector workers.

“I approved an increase that is above the average CPI increase and is equivalent to the current minimum annual pension of $15,000,” he said. “This will bring the National Pension Act (NPA) outlays in line with the amount recently set by government for civil servants’ pensions,” Ebanks added.

All applications received from 1 June 2024 and all approved RSAs are entitled to a new maximum of CI$15,000, or CI$1,250 per month, at the next disbursement. However, for many retirees, much of this money must be used to pay for exorbitant health insurance or medical expenses.

Labor Secretary Dwayne Seymour called it a laudable increase. “In an era of rising costs of living, this proactive measure ensures our retired citizens have the additional support they need to manage their family finances with greater ease and dignity,” he said.

The money comes from private pension plans, which are made up of mandatory contributions of 10% of wages from private sector workers and their employers, with employers required by law to contribute at least 5%. In many cases, people’s funds are so small that they receive the full amount within a few years of retirement.

However, those who still have money in their accounts can now withdraw slightly more, but living on CI$1,250 a month will still be a struggle if that is their only income.

During the COVID-19 lockdown, private sector workers were allowed to withdraw money from their pensions, and mandatory contributions were frozen for more than two years, further reducing their funds. The government amended the law in 2020 to allow people to withdraw a lump sum of up to CI$10,000 plus 25% of their pension balance.