Updates to the Public Service Pensions Law
Government will soon enact the Public Service Pensions (Amendment) Law, 2019 and this brings forward a few, but meaningful improvements to the Public Service Pensions Plan (PSPP). The Public Service Pensions Board (PSPB) would like to highlight the key developments that should be of interest to you as a plan member and an explanation of the updates is provided under each heading below.
Disabled Persons Benefits
The improvement in this area is that the Public Service Pensions Law (2017 Revision) (“the Law”) is being amended to extend benefits to eligible “deferred vested” plan members (i.e. a former public servant who terminated employment before retirement age). This means that the Law is being updated to allow for former plan members, who are permanently disabled, and unable to work for medical reasons, to have the payment of their pension benefits commence prior to otherwise becoming eligible for retirement, subject to being certified by the Chief Medical Officer.
This change is being made to better support plan members as previously, a former plan member who is disabled still had to be eligible for retirement in order to start receiving pension payments. In addition, it ensures that if you leave your job and become disabled and unable to work, you may now be able to access your pension benefit with the PSPB.
Of note, the PSPB will be sending notifications to those disabled former plan members that we are aware of so these former plan members can initiate the application process to start collecting benefits.
Cash-out Provision for non-Caymanians
The major focus is that the cash-out provision is being preserved for plan members, but there are some slight administrative modifications to this area. That means that presently, and moving forward, when a non-Caymanian stops working and residing in the Cayman Islands, the PSPB is and will still process a cash-out of that individual’s pension benefit, if they request such an option.
For any current plan members, the only modification to this provision is that the cash-out timeline is now moving to two months from the original one month period. This change is being done to:
- ensure that proper due diligence can be done to ensure a non-Caymanian is no longer residing in the Cayman Islands;
- allow the PSPB the necessary administrative timing to facilitate such requests, while not having to liquidate investments to pay cash-out requests; and,
- discourage any ‘revolving door’ approach for non-Caymanian coming into and out of employment or residency in the Cayman Islands.
It is important to stress that only our current active members will be subject to this two month time period provision. If you are an active member right now, then regardless of when you leave employment, if you fit the criteria of a cash-out provision as a non-Caymanian, you will only remain subject to the two-month timeline.
The last modification is for any employees who start work and join the Plan after January 1, 2020. Any of these future plan members who request a cash-out will be subject to a two-year waiting period of not working and residing in the Cayman Islands. This is a longer period, but it only impacts individuals becoming employed in 2020 or later and it still preserves a cash-out option for these individuals as well.
Credited Rate of Return
Presently, at the end of each year, the PSPB determines the rate at which interest is credited on every plan member’s account. This is done by calculating the average of the rates of return received on investments for the previous three years, net of expenses. Once the annual rate is calculated, a full year's interest is added to account balances.
The Law is being updated so that the credited rate of return is calculated on a quarterly basis instead of annually. This then means that account balances will now be credited on a quarterly basis as well.
Why is this change important? By moving to a quarterly update instead of an annual one, it ensures that your account is updated more regularly and allows an even better approach to actual returns being smoothed to address the effects of market volatility. This is your pension and it is important that the best approaches to securing and growing your account are utilized to ensure your future retirement.
Questions or Concerns?
There are some additional minor updates to the Law which were necessary in order to have correct language, but many of these updates are incidental as they include minor wording changes or updating a few definitions in the Law to reflect correct meanings.
Take a minute to look at the Law and the updates being made with the Public Service Pensions (Amendment) Law, 2019 and how these may impact you. The Law can be viewed on the PSPB website by selecting the links below. If you have any questions about these matters or your individual pension account, contact the PSPB directly by email at email@example.com
Public Service Pensions (Amendment) Law, 2019
Public Service Pensions Law (2017 Revision)