Reaping the Benefit of the Higher Retirement Age
Nov 15th 2019
08 : 29 am
September this year marked three years since the retirement age within the public service was increased from age 60 to 65. During this time, hundreds of employees have seized the opportunity to continue growing their pensions through monthly contributions that represent 12% of their monthly salary (i.e., 6% employee and 6% employer contributions). Three years in, the Portfolio of the Civil Service, the Public Service Pensions Board and a civil servant reflect on the effects of the policy decision.In September 2016, when laws were changed to raise the retirement age, there were 242 employees aged 60 and older (as the table below indicates). Three years later that population has grown to 368 employees. In September 2016 there were 195 civil servants between the ages of 60 to 64, and none were able to continue their pension contributions. Three years later, there are 283 civil servants between the ages of 60 to 64 and 92% of these employees continue to save towards their retirement.
| September 2016 (Before the new law) |
September 2019 (3 Years Later) |
|
| Number of civil servants aged 60 and older |
242 | 368 |
| Number of civil servants between ages 60 to 64 |
195 | 283 |
| Number of civil servants aged 65 and older |
47 | 85 |
| Number of civil servants between ages 60-64 and contributing to their pensions |
0 | 259 |
Also notable is the fact that whilst the number of civil servants who work beyond age 60 has grown, so too has the number of younger persons in entry level positions. The population of civil servants who are 29 years old and younger has grown from 451 civil servants (June 2016) to 541 civil servants (December 2018).
Civil service participation yielded added provisions
Chief Officer of the Portfolio of the Civil Service Gloria McField-Nixon credits the success of the policy to the active participation of more than 400 civil servants dating back to 2015, while the policy was being created. As a result of their representations, numerous provisions were accommodated within the policy, including allowing:
- previously retired persons who were still employed and were below age 65 to resume pension contributions,
- police officers whose terms and conditions are governed by the Police Law to participate in the policy change,
- persons of retirement age to be able to opt for phased retirement so they could retire gradually by reducing their hours or taking on a less senior role in preparation of retirement, and
- appointing officers with the support of the Deputy Governor, to resolve any conflicts in succession planning by transferring an employee who is of retirement age into another role whilst preserving that employee’s seniority pay.
Mrs McField-Nixon says that this policy is an example of what is possible when there are positive employee relations and civil servants are engaged to give their best. “The Cayman Islands Government, the Public Service Pensions Board and civil servants are working together to create conditions where employees, upon reaching retirement age, have savings that will last their lifetimes,” explained Mrs McField-Nixon.
Knowing your numbers: retirement income
She added that while maximising our pension savings is of huge importance, it is just one part of the equation.
During the policy consultations held in 2015, civil servants were reminded of the importance of knowing their numbers. “It is important for all of us to anticipate what income we will require to meet our expenses when we retire. Pensions will play a large part in filling that need but the most effective strategies also include having personal savings and investments to meet your future needs,” Mrs McField-Nixon said.
Advantage for the Pension Plan
In addition to creating an employee benefit, the change in the retirement age has also provided an additional tool for the Cayman Islands Government and the Public Service Pension Board (PSPB) to manage the demands on the pensions plan.
Actuaries forecasted that in addition to benefitting pensioners, creating the avenue for persons to retire up to five years later in life could also create a benefit valued as much as 30 million dollars over the lifespan of the Plan, depending upon how many eligible members opted to work longer.
“It is an encouraging sign that this change is resulting in a more adequate level of replacement income in retirement for our plan members,” said the PSPB’s Chief Executive Officer Jewel Evans Lindsey, “and being able to improve the standing of the Plan demonstrates this has a positive impact on many levels.”
A welcome extension to working life and improved pension on retirement
Upon retirement, a plan member’s account is converted to an annuity, meaning that pension payments continue throughout the life of the pensioner and typically, the lifetime of their eligible dependent(s). The early results show that the change in retirement age is better positioning civil servants to have an improved pension that supports retirement living.
On the employee’s end, it also extends job security and enables an employee five more years to pay off mortgages and accumulate more savings.
This is the case for Human Resource / Computer Liaison Officer Millant Hydes-Brown, who explained that she welcomed the extra five years. “Raising the retirement age provided me with the ability to continue to service my mortgage, to contribute longer to my pension and add a bit more of saving to my bank account. I am grateful for the extension of my working life,” she explained.
While it is not automatic, many persons with the support of their managers continue to work beyond age 65. The population of civil servants aged 65 and older has grown from 47 persons (September 2016) to 85 persons (September 2019). For more information on your retirement options, visit www.pspb.ky.