As persons across the Cayman Islands receive their pension payouts, many individuals are now financial buoyant once again, which could bode well for the Islands’ economy. However, with foreign/expatriate workers accounting for large numbers of Cayman’s employees, many say much of that money could be leaving the Cayman Islands to be invested in other jurisdictions via the remittence services.
“Most people are likely going to send that extra money home and invest it in their countries, where the cost of living is not as high as the Cayman Islands,” noted Financial Consultant Evan Goulatte.
He said many of Cayman’s ‘lower-skilled’ and minimum wage labourers in Cayman are individuals who are highly educated but had to come to Cayman because of the value of the currency, explaining that such persons would likely be savvy enough to make the most of that money by putting it into affordable Real estate or businesses.
I think this will leave Cayman at a loss because the money will not be spent here and that is something that will affect the recovery of Cayman’s economy in the short term.
Mr. Goulatte said another very real prospect was that many professional people who have considerable amounts of money in their pensions, would take the lump-sum payout and simply migrate back to their home countries.
“That amount of money is a great start in a lot of places and it would take them forever to stay here and save that so I think many of them will be taking their money and counting their blessings right now.
“Every cloud has a silver lining and I am sure many people will be looking to make the most of their money.”
However, recent comments by the CEO of Fidelity Bank in which he expressed little confidence that persons would do the right thing with their money and railed against the prospect of having to pay out pension money, have revealed that not everyone shares Mr. Goulatte’s sentiment and optimism.
“The Fidelity Boss is entitled to his opinion and I am sure there will be some who abuse the opportunity and spend the money on a vehicle or something like that but I think the people will be few.
The significance of having a large quantity of money at once will be a new responsibility for some certainly but those who are living in Cayman should also try to make the money stretch. Just because you don’t have the option or luxury of investing somewhere else does not mean one should be careless.”
Persons are able to take out up to CI$10,000 and up to 25 percent of the remaining amount from their pensions, though the Cayman Islands Premier, the Honourable Alden McLaughlin warned that funds in many pension plans may have decreased due to impact the COVID-19 has had on markets around the world.
The plan is only for the private sector currently. Civil servants are not included.
Person waited up to seven days to process pension withdrawals administratively and then up to 45 days to receive their funds.
Unemployed persons with pension plans were also eligible under the plan, except those already on pension/ “drawing down their pension”, according to the Premier, who cautioned that if individuals did not need the funds, they should not take them.
The money that is now flowing through the community will do well to give the economy a much needed injection of liquidity but long term, the hope is not just that people will have money but that they will not need to depend on the government for it.