Defined Contribution Part

This section explains the benefits payable from the Defined Contribution Part of the Plan that are different from those of the Defined Benefit Part and apply only to those participants who are participants of the Defined Contribution Part. If you are a participant in the Defined Benefit Part and are considering transferring to the Defined Contribution Part, it should be read in conjunction with Common Features, which describes the features, which summarizes the features common to both the Defined Benefit Part and the Defined Contribution Part.

Contributions

Whilst an active participant of the Plan, contributions of six percent of your Pensionable Earnings will be deducted from your salary or wages and will be credited to your Participant Contribution Account. A further six percent of your Pensionable Earnings will be credited to your Employer Contribution Account on your behalf by your employer. The balances in both these accounts will increase each year with interest.

Example: Assuming that you join the Plan with an initial salary of $2,000 per month, you will be required to contribute $120 to your Participant Contribution Account each month. A further $120 will be credited to your Employer Contribution Account each month by your employer.

Accrued Benefit

Your Accrued Benefit under the Defined Contribution Part is the sum of the balances in both your Participant Contribution Account and your Employer Contribution Account at the time of your retire­ment or death. These balances will reflect the contributions paid into these accounts by both you and your employer with interest.

Example: Table 1 below shows the total balances that might accumulate in your accounts by your Normal Retirement Age, if you join and leave the Plan at the ages shown.

Table 1

Leave 35 45 50 55 60
Join $ $ $ $ $
25 362,409 635,845 746,250 842,150 925,450
35   167,866 235,645 294,519 345,658
35     41,611 77,754 109,149

From the table, you can see that if you joined the Plan at age 35 with an initial salary of$2,000 per month and you retire at age 60, then the total balance in your Participant Contribution Account and your Employer Contribution Account at your Normal Retirement Age might be some $363,627. This projection assumes that interest is credited at the rate of 8% per annum and assumes that your salary (and therefore your contributions paid) increases each year at the rate of 5.0 %. In practice, the rate at which interest is credited will vary each year and is not guaranteed.

Table 2 below shows the effect on the total account balances if interest was credited at the rates of 7%, 8 % and 9 % each year and you retired at your Normal Retirement Age of 60.

Table 2 Rate of interest

  7% 8% 9%
  $ $ $
Join      
25 769,131 925,450 1,120,922
35 304,202 345,658 394,011
45 101,363 109,149 117,642

Benefits on your Retirement

When you can retire

You can retire from the Plan and start to receive your pension in any of the following situations:

  • When you reach your Normal Retirement Age, age 60. This is called Normal Retirement;
  • When you reach age 50, as long as you have at least ten years of Qualifying Service. This is called Early Retirement;
  • If you become permanently disabled, as certified by the Chief Medical officer, regardless of your age. This is called Disability Retirement; or
  • If your office is abolished or if your department is reorganized and you are removed from office, regardless of your age. This is called Special Retirement.

How your benefit is calculated

When you retire from the Defined Contribution Part, your Accrued Benefit (the sum of your two account balances) will be converted into a pension although you may elect to receive up to 25% of your Accrued Benefit as a lump sum payable immediately. The remaining balance will be payable in one of three different forms of payment, as explained below. The amount of pension payable to you will therefore depend on four items: the total of your account balances, the amount you have elected to take as a lump sum payment, your age (and the age of your spouse in some circumstances), and the form of payment which you elect.

An additional pension is payable in the event of a Duty-Related Disability - see Common Features.

Forms of Payment

The three forms of payment are Single Life Only, Single Life with Ten Year Guarantee and 50% Joint & Survivor.

  • If you elect a Single Life Only pension, then you will receive a monthly pension payable to you for the rest of your life. When you die, there will be no further payments made. This will be the Normal Form of Payment for you if you are not married when you retire. If you are married, then you may still elect to receive a pension in this form, but you will need to provide the written consent of your spouse for this election.
  • If you elect the Single Life with Ten Year Guarantee pension, then you will receive a slightly smaller monthly pension for the rest of your life, but an additional benefit may be paid on your death.
  • If, at the time of your death, fewer than 120 monthly pension payments have been made, then your designated beneficiary will receive a lump sum equal to the number of installments of your current monthly pension by which the total number of payments made was less than 120. You may elect to receive your pension in this form whether or not you are married, but if you are married you will need to provide the written consent of your spouse for this election.
  • If you are married when you retire then your Normal Form of Payment will be a 50% Joint & Survivor pension. Under this form of payment, a pension is payable to you for the rest of your life, followed by a pension payable to your spouse after death, equal to one-half of the pension you were receiving. The spouse's pension is payable only to your spouse at the date you retired and the factor for converting the account balances into a pension will depend on your spouse's age relative to your age.

Example: Taking the account balances in the previous example assuming that interest is credited at the rate of 8% each year and that you leave the Plan at your Normal Retirement Age of 60, then the resulting account balances might be converted into a monthly pension as shown in table 3 below (note for the 50% Joint & Survivor calculations we assume the spouse to be age 60 as well).

Table 3 Estimate of monthly Pension

  Single Life Only   Ten Year Guarantee   50% Joint & Survivor  
  $ % $ % $ %
Join            
25 6,170 (56%) 5,937 (54%) 5,654 (51%)
35 2,304 (36%) 2,218 (34%) 2,112 (33%)
45 728 (18%) 728 (18%) 667 (17%)

From the table above, you can see that the total account balance of $345, 658 for a participant who joined the Plan aged 35 and left at age 60, was converted into a Single Life Only pension of $2,304 per month. If you instead elected a Ten Year Guarantee pension then the pension would be slightly lower at $2,218 per month. The 50% Joint & Survivor pension would be slightly lower again at $2,112 per month.

When looking at these projected pensions you should bear in mind the effects that inflation will have on the value of the pensions shown over a long period of time. To illustrate this, the table above also shows in parentheses, the same pensions as a percentage of final salary at your Normal Retirement Age. From this table you can see that the Single Life Only pension of $2,304 per month would be equivalent to a pension of approximately 36 % of final salary, assuming that salary increased each year at 5%.

Benefits if you Die

Death in Service

If you die whilst an active participant of the Plan, leaving no dependent children, then your surviving spouse will be entitled to receive a pension payable for the remainder of his or her life, based on your Accrued Benefit (the sum of your account balances) at your death. In the event that you die leaving dependent children as well as a surviving spouse, then your spouse will receive a pension based on one-half of your Accrued Benefit at your death and your children will receive the remaining half of your Accrued Benefit split equally between them in a single lump sum payment.

If you die leaving dependent children but no surviving spouse, then your Accrued Benefit will be split equally between your dependent children and paid as a single lump sum. Should you die leaving neither surviving spouse nor dependent children, then the total of your Accrued Benefit will be paid as a lump sum to your designated beneficiary, or to your Estate.

If the total lump sum value, calculated in accordance with Plan actuarial tables, of the pensions payable to your surviving spouse and dependent children is less than twelve times your Final Average Pensionable Earnings at your death, then the balance will be paid as a lump sum to your designated beneficiary.

An additional pension is payable in the event of a Duty-Related Death - see Common Features.

Death after Retirement

Whether a benefit is payable upon your death after retirement depends on which form of payment you choose at retirement. For example, if you choose the Single Life Only form of payment, no further benefit will be paid on your death except for a refund of the remaining balance in your Participant Contribution Account, if any. If you choose the Single Life with Ten Year Guarantee form of payment, a lump sum will be paid as long as you die within ten years after your date of retirement as described above. If you choose the 50% Joint and Survivor form of payment, your spouse will receive a pension equal to 50% of the pension you were receiving at your death.

Benefits if you Leave Early

If you leave the Plan early for any other reason (for example if you leave to go to another job) then you will be entitled to a deferred pension, payable when you reach your Normal Retirement Age. Your deferred pension will be calculated as your Accrued Benefit, based on your account balances at your Normal Retirement Date, according to the form of payment you then elect.

In such an event, you have the following three options from which to choose:

  • You may wait until you reach your Normal Retirement Age of age 60 to receive your deferred pension
  • You may choose to receive your deferred pension at any time after reaching age 50, if you have more than ten years of qualifying service under the Plan. In such case, the amount of pension you receive will be based on your Accrued Benefit at your early retirement date and the form of pension you then elect; or
  • You may transfer your benefits to any other approved plan (which is registered with the Superintendent of Pensions Office), in which case a Transfer Value will be paid from the Plan to the approved plan of your choice. If you are leaving residency in the Cayman Islands altogether and do not have Caymanian Status, then you may receive the full cash amount of your Transfer Value as a lump sum. The Transfer Value will be equal to the sum of the balances in your Participant Contribution Account and your Employer Contribution Account at the time of the transfer.