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Community 24 Jun, 2020 Follow News


Brett Hill, President & Chief Executive Officer of Fidelity Bank (Cayman) Limited

You might be forgiven for thinking that in the midst of one of the most serious economic downturns in generations, that Cayman is awash with money - or, to be more precise, flooding with money.

But this apparent flood is flowing through a pipeline directing the flow of newly acquired money, by many, out of the country.

It’s already becoming obvious that Cayman is haemorrhaging money and huge amounts are flowing out of the country.

The floodgates have been opened with pensions management companies now processing claims from the government’s early Pensions Withdrawal Scheme for private sectors employees.

The well-intentioned objective was to offset the impact on the personal and household finances with hundreds of workers laid off due to the government-authorised business lockdown necessitated by the COVID-19 crisis.

It became noticeable recently, since the amendment to the Pensions law in May, that an air of expectation was building up as many persons looked forward to their anticipated ‘windfall’.

There were some reservations expressed during the debate in the Legislative Assembly and the community, but in the end, the amendment sailed through.

The scheme which is not available to civil servants, allows private-sector pension holders to dip into their pension pot and withdraw up to $10,000, plus 25% of the remaining balance.

That’s in addition to a six-month pension holiday.

Where Hon. Premier Alden McLaughlin had estimated that this would put around CI$20 million into circulation in the economy to counter the effects of the economic slowdown, the burning question now is how much of this will instead simply flow through the economy rather than remaining here?

The early indications are that the anticipated spending to spur business activity will take place but the degree to which it will circulate within the local economy is doubtful judging from projected and emerging spending patterns.

Remittances and spending on consumer items purchased online could very well counter the desired effect.

A concern expressed during the Public Accounts Committee hearing a few days into pensions in the Cayman Islands is worthy of reflection.

Brett Hill, President & Chief Executive Officer of Fidelity Bank (Cayman) Limited might have been prescient in giving evidence to the PAC with his observation that most people living in Cayman are addicted to shopping online, the upshot of that being that money is sent away rather than being re-invested in Cayman.

The exchange between the Fidelity boss him and PAC chairman, Ezzard Miller was instructive.

Not only did it highlight the seemingly inadequate consultation between government and industry over how to ensure that the local economy benefits most from opening the floodgates of the massive release of pensions cash into the economy, but for also addressing other pertinent issues regarding pensions management in Cayman.

Public consultation might have been a route to ensuring that impulsive spending doesn’t defeat the purpose of what is really an emergency measure.

As Mr Hill cautioned, there is a real risk of, as he put it: “kicking a very large can’ down a very narrow road.”

The underlying concern remains one of short term gain for long term pain.

With the funds now being released into individual bank accounts, it might just be the right time for a large scale public information campaign on personal financial management.

Retail therapy at this stage for the newly cash-rich might not be the best prescription in an emergency economic situation.

The sage advice is: Be prudent not profligate with the pension spending.

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