Filed under: Disaster Recovery
With hurricane season upon us, now is the time to ensure all important and essential documents are in order and that a robust plan of action is in place.
Silver Thatch Pensions’ thorough disaster recovery plan ensures that we are prepared for any eventuality, which means no matter what, our members can access their pension plan, anytime anywhere.
In case of a catastrophic event, Silver Thatch Pensions utilizes the Brac Informatics Centre. All information is replicated to this secure support site on a daily basis, which ensures that our members’ information is always protected and accessible.
We believe that flexibility is key in the event of a disaster or extended disruption to business, which is why we offer our members numerous ways of staying in touch and accessing their pension plan.
For example, by utilizing our electronic bill pay system members have the ability to make contributions electronically using Butterfield and CNB’s online bill pay services, meaning that wherever they may be in the world, our members can continue to make vital contributions into their pension plan to ensure a secure financial retirement.
Our live chat function is an innovative web based chat functionality, which allows our members to chat online to one of Silver Thatch Pensions’ customer service representatives. This offers members real-time support to any queries and allows members to speak directly to an administrator via the web, no matter where they may be based. For added support our VOIP phone system allows members to make phone calls and receive calls over the internet.
For further ease, employers can also continue to make contributions on behalf of their employees by utilizing our excel template via the web, instead of more traditional methods such as faxing, mailing and hand delivering. Any questions or queries can also be emailed via our secure support email functionality to support@silverthatch.org.ky. All emails sent to this address are forwarded to CEO of Saxon (client services agent for Silver Thatch Pensions) Brian Williams.
Filed under: Compounding
Saving is an important part of ensuring a plentiful nest egg for when you retire. The earlier you start to pay into a pension plan, the more you are likely to save, thanks to the power of compounding.
So, what is compounding?
“Compounding is the fact that the money you make off an investment can be reinvested to make even more money than your initial investment. The money you make goes back to work to make you even more money than before.”
Over the years as your pension plan increases in value, so too does the interest earned.
Let’s take someone earning a yearly salary of $36,000. Unless they have opted into the pension holiday, 10% (5% from the employer; 5% from the employee) has to be paid into a pension plan. That’s $300 every month.
If you put aside $300 every month over a five year period into a bank account which earns no interest, you will have saved $18,000. Pay the same into a pension plan and your $300 monthly payments will add up to far more, thanks to the power of compounding. For example, if your pension plans rate of growth is 6% over the same five year period, you will have saved $20,931 – that’s $2,931 more just for saving into a pension plan!
Continue to put the same amount of money aside for a further five years (10 years in total) and your pension plan will be worth $49,164 – that’s $13,164 in growth alone!! Compare this to the $36,000 you would have saved if you had just paid into a standard bank account and it’s easy to see how saving into a pension plan is the right thing to do.
Assuming a continued 6% growth rate and contributions of $300 every month:
By year 20 – your pension plan will be worth $138,612, of which $66,612 will be gains.
By year 30 – your pension plan will be worth $301,355, of which $193,355 will be gains.
By year 40- your pension plan will be worth $597,447, of which $453,447 will be gains.
After 40 years of saving the growth has far exceeded the total amount of contributions made, which total $144,000.
Making additional voluntary contributions (AVCs) is a great way to further boost the value of a plan. For example, by just making an additional $10 AVC every month over a 40-year plan, the same pension would now be worth $617,362. That $10 AVC every month has added up to an additional $19,915 – and it’s all thanks to the power of compounding!
Filed under: Pension Holiday
Few people have opted to take advantage of the pension holiday, which allows workers to suspend making the mandatory payments into their pension plan.
Silver Thatch Pensions has more than 14,000 members, of which so far only 147 applications have been received; 77 from Caymanians and 70 from non-Caymanians. The figures represent just over one percent of our members. Other local pension providers have also reported similarly low uptake figures.
The pension holiday came into effect on 26 April, giving members so far more than a month to choose to participate. The holiday aims to stimulate the local economy and ease the financial burden on employers in the wake of increased business fees. To participate, both the employer and the employee must voluntarily agree.
The figures highlight how Cayman’s residents are well versed on the importance of saving for their retirement and that they recognize that by opting into the pension holiday they would be losing out on the employer’s five percent share. In addition, it would seem Cayman’s residents understand that the pension holiday’s short-term gains are not worth the long-term effect the holiday will have on the value of their pension.
Filed under: Contact Us
Got a question about your pension and need to get hold of us?
Saxon Administration Ltd.
Agents for Silver Thatch Pensions
Phone: (345) 943-7770
Fax: (345) 943-7771
Email: support@silverthatch.org.ky
Filed under: Pension Holiday
The pension holiday explained
Has the pension holiday left you feeling a little baffled? Here’s the low down on what you need to know.
Step 1
Before proceeding, both the employer and employee must both voluntarily agree to participate. No employer can force you to participate.
If both voluntarily agree, the employer and employee must then both sign an application and agreement form.
The application and agreement form, along with a certified copy of the employee’s ID including a certified copy of the photographic passport page; AND a certified copy of the passport page where confirmation of Caymanian Status has been stamped, is then sent to the employee’s pension administrators.
Step 2
Once the administrators receive the paperwork they will verify the details and ensure contributions are up to date and current.
The application will then be approved or denied. Note that if contributions are not up to date the application will be denied.
The pension holiday will start from the date the application was received and contributions must be pro-rated to the receive date and paid up. Late payment can lead to the revocation of that approval.
For non-participating employees, contributions must remain current.
Note, that fines for non-compliant employers have increased to $10,000.
Post pension holiday
For Caymanians, mandatory pension contributions will commence on 26 April, 2011. For non-Caymanians, mandatory contributions will commence on the 26 April, 2012.
Filed under: Pension Holiday
Governor Duncan Taylor has signed legislation which will allow the much debated pension holiday to take effect, with a provisional date touted as Monday, 26 April.
The pension holiday allows private sector companies to suspend pension payments for both Caymanian and non-Caymanian employees. To opt in, both employer and employee must mutually agree, and the administrator needs to certify the agreement based on whether contributions are up to date.
Government hopes that the pension holiday will stimulate the local economy and help soften the blow to local employers following the recent hikes in work permit fees; however how many companies and employees choose to participate in the scheme remains to be seen.
Poll
The results of our recent poll suggest that the majority of people will not participate, with almost 70 per cent voting that they realize the benefits of saving into a pension. Some 20 per cent voted that they would be participating in the pension holiday, with 13 percent voting as undecided.
Join the debate!
Do you think the pension holiday is a good idea? Will you be participating? Tell us what you think by leaving a comment below.
For full details on the pension holiday, click on the link below.
http://www.gov.ky/portal/page?_pageid=1142,4891751&_dad=portal&_schema=PORTAL
Filed under: Defined Contribution
What is a defined contribution plan? Put simply, it is a pension plan where contributions are paid into an individual members account and the pension received is based on the assets in the account at retirement.
With a defined contribution plan the account is in the individual name. Contributions are invested typically in equities and fixed income and the returns are credited to the individual’s account. On retirement, the individual’s account is used to provide retirement benefits, which are pre-determined by calculations based on various assumptions, such as life expectancy and stock market performance. The retiree receives benefits based solely on the amount contributed into their account.
Under Cayman’s multi-employer defined contribution plan, account balances will fluctuate in value because the funds have to be invested. With a defined contribution plan individuals have far greater control over their pension. For example, with Silver Thatch Pensions, plan members are even able to select the type of portfolio additional voluntary contributions are invested in.* Chile, Poland, Bermuda and Mexico all operate a similar pension plan as Cayman; that is a privately run pension system with government oversight.
With a defined benefit pension plan the benefits received on retirement are determined by a set formula, rather than investment returns. In many cases, an employer commits to paying its employee a specific benefit for life beginning at his or her retirement. The amount is known in advance and is usually based on factors such as age, earnings and years of service. It is the employer that manages the assets and employees have no active involvement. The US Social Security system operates a system which is similar to a defined benefit scheme. However, worth noting is that if the US continues operating its Social Security system under its current scheme, by 2018 the dollar amount of those receiving benefits will exceed what’s paid in.
It is because of shortfalls such as this, that many employers and governments over the past few years have been examining the possibility of switching from a defined benefit pension plan to a defined contribution plan, or a hybrid of both. Under a defined benefit plan it is the employers who are at risk of fluctuating markets and ultimately bankruptcy. With a defined contribution plan it is the individual who assumes most of the risks, making pension provider choice critical. When stock and fixed income market growth causes investment values to increase, the retirees see their wealth and income increase. Additional benefits are that a defined contribution plan is far more portable, allowing employees the freedom to move their pension when they switch employers, as well as allowing employees far greater involvement in their ultimate retirement income.
*For more information on AVCs see our previous blog topic, Smart Investing for a Secure Financial Future, January, 8, 2010.
Filed under: Pension Holiday
The amendment to the National Pensions law was approved by lawmakers in the Legislative Assembly late Monday, 1 March. Before it comes into effect, the bill must signed by the Cayman Islands Governor, Duncan Taylor.
The amendment allows for a voluntary suspension of pension payments. Government hope the pension holiday will stimulate Cayman’s dwindling economy and help reduce employer expenses following the recent increases in work permit fees.
The amendment allows Caymanian employees and their employers a 12-month holiday from making contributions and a two-year break for non-Caymanians or work permit holders.
Employees with work contracts that specifically include pension benefits will still be eligible to receive these, unless both the employer and the employee sign an agreement to take advantage of the proposed pension holiday. If an agreement is reached, the employee could still choose to pay their five per cent salary contribution.
While the idea of having some extra cash to spend may sound appealing, the long-term impact on a pension fund can be devastating.
Silver Thatch Pensions reviewed the potential a two-year impact could have on members’ account balances at retirement.
We used the following scenarios:
- An annual salary of $50,000 with a 4% salary increase throughout a member’s career.
- Annual contribution of 10%, with no additional voluntary contributions.
- A retirement age of 64.
Here are the results:
25-year-old with 40 years until retirement – The most likely scenario is $193,000 less than if there were no contribution holiday. There is a 90% probability that the shortfall will be between $80,000 and $697,000 depending on future investment results.
35-year-old with 30 years until retirement – The most likely scenario is $102,000 less than if there were no contribution holiday. There is a 90% probability that the shortfall will be between $41,000 and $218,000 depending on future investment results.
45-year-old with 20 years until retirement – The most likely scenario is $38,000 less than if there were no contribution holiday. There is a 90% probability that the shortfall will be between $23,000 and $85,000 depending on future investment results.
Join the debate!
Let us know whether you will be taking advantage of the pension holiday by participating in our poll. Or, tell us what you think about the pension holiday by leaving a comment below.
Filed under: Pension Holiday
The proposed pension holiday once again took centre stage, with details of the voluntary temporary suspension of legal requirements for pension payments debated at Legislative Assembly on Friday, 26 March.
Employment Minister, Rolston Anglin, outlined the proposed amendments, which will allow Caymanian employees and their employers a 12-month holiday from making contributions and a two-year break for non-Caymanians or work permit holders.
Employees with work contracts that specifically include pension benefits will still be eligible to receive these, unless both the employer and the employee sign an agreement to take advantage of the proposed pension holiday.
A date has yet to be agreed as to when the pension holiday will take effect.
Currently, the National Pensions Law stipulates that employees and employers must each contribute five percent of the employee’s annual salary into a pension plan. The law came into effect in June 1998.
While the pension holiday may offer a few extra dollars in an employee’s pockets, the long-term ramifications far outweigh any short-term gains. Just a one-year break from making payments into a pension plan can considerably impact its value. We urge members to continue contributing into their pension plan to ensure financial security in retirement.
For further details on the pension holiday as reported in the Caymanian Compass and on Cayman News Service, click on the links below:
http://www.caymannewsservice.com/headline-news/2010/03/01/pension-holiday-coming
http://www.compasscayman.com/caycompass/2010/03/01/Pension-suspension-plans-revealed
Filed under: Pension Compliance
Cayman’s pensions have once again been gaining considerable column inches and air-time in the local media, with news that there are more than 670 employers that have not forwarded contributions to their employee’s pension plans.
The law, which came into effect in June 1998, stipulates that employers must provide a pension plan for all employees aged 18 to 60 (except for domestic help) and both employee and employer must each contribute into that plan five percent of the employee’s pay.
Silver Thatch Pensions, through its client services agent, Saxon Administration, is diligent in reporting (by law) delinquent employers to the National Pensions Office for contributions in arrears over 45 days. We also notify every employer by mail and/or by phone if they are in arrears. The National Pensions Office follows up with a letter to the employer, and if no payment arrangement is made, will take legal action. Interest is calculated on arrears, and when paid up, is proportionally distributed to the employee’s accounts.
The current news about non-compliant employers highlights the importance of understanding the National Pensions Law and your rights to a pension. It also underlines the importance of regularly monitoring your pension account to ensure the correct and timely contributions are being made by your employer.
Silver Thatch Pensions conveniently provides online access to a monthly statement for all its active members. This ensures that by just a few simple clicks of a mouse members can quickly see if their employers are making the correct monthly payments. In addition we also send out quarterly and annual statements by post.
Be diligent and take time to check your pension payments regularly. If you are a member of Silver Thatch Pensions and believe that your employer is not in compliance with the National Pensions Law, contact our office and ask to speak to an administrator today.
