1. INFORMATION SESSION ON THE CI NATIONAL PENSIONS LAW April 2008 The “BRAC”

2. Presentation Outline 1.Introduction – National Pensions Office (NPO) 2.History of the CI National Pensions Law (NPL) 3.Overview of Main Provisions/Responsibilities –Employers –Employees –Compliance Issues –Penalties 4.Basic types of Pension Plans 5.Results of 10 Years of Operations 6.Benefits Available From the NPL –“Pensions” –Refunds 7.How Much is Enough 8.NPO Web-Site and Contents –Information available –Forms

3. 1.National Pensions Board/Office 1998 – 2002 (2 employees – Superintendent & Administrative Officer) Implementation, initial registration, renewals, guidance notes, forms, form letters, enforcement, education and public relations 2002 – 2004 (2 employees – Acting/Interim Superintendent & Officer) Registration renewals, maintenance, system development (Pennat), public meetings re: review of National Pensions Law 2004 – 2006 (3/4/5/6 employees – added Deputy, Administrative Officer, and 2 Inspectors/Investigators) Implemented electronic System, review of processes, procedures and correspondence, Law review, consultancy project, enforcement/prosecution 2007 – onwards (7/8 employees – added Inspector/Investigator, Receptionist – shared with HIC) Law amendments, consider consultancy project recommendations, enhance systems, enforcement & prosecutions, implement strategic communications initiative, communicate – communicate!

4. 2.National Pensions Law - history The Law establishes minimum standards for pension plans operating in the Cayman Islands – it onto itself is not a “pension plan” and provides no benefits National Pensions Law became effective July 1, 1998 for all Caymanians Effective January 1, 1999 for expatriate employees (except domestics employed to work in individual homes) Pension Participation is Mandatory Therefore, a Condition of Employment In the Cayman Islands

5. 3.National Pensions Law – Main Provisions Minimum contribution of 10% of Years Maximum Pensionable Earnings - $60,000 annually Immediate “vesting” of contributions Earliest retirement age is 50 years Normal retirement age is 60 or by 61 st birthday “pension” in the form of an annuity, Retirement Savings Arrangement or Individual Retirement Account Compulsory spousal benefits at 100% - limited benefits for dependent children (different pre and post retirement) If no spouse opportunity to name a beneficiary Opportunity for Additional Voluntary Contributions

6. 3.National Pensions Law – Main Provisions Contribution rates – combined employee and employer must be a minimum of 10% of Pensionable Earnings –Employees – no more than 5% of pensionable earnings (deductions from salary permitted to be taken by the employer) –Employers – no less than 5% of pensionable earnings –Self employed – 10% of pensionable earnings Timing – must be paid at regular intervals (at least monthly) and are due to be paid by the 15 th of the month following the month for which the contribution is attributable. Status – money withheld by an employer, from money payable to an employee, whether by payroll deduction or otherwise, and an amount equal to the required employer contribution due to a pension plan, is deemed to be held in trust by the employer until the employer pays the money into the pension fund.

7. 3.Employer’s responsibilities Provide a pension plan or make contributions to a pension plan for every person employed by the employer in the Islands. Ensure that the employee and employer pension contributions are paid into the appropriate pension fund by the 15 th of the month following the month for which the contributions are attributable. Advise the pension plan administrator of changes in employment status of employees and provide administrative information required, such as contact details, employee information, etc. Provide any information requested by the National Pensions Office and comply with their orders and directives

8. 3.Employee’s responsibilities Take an interest in what pension plan your employer has Ensure your employer is providing you with a plan Ensure payroll deductions are being taken, if applicable Ensure contributions are going to the plan administrator Save any payroll slips and compare pension deduction amounts to pension plan statements – insure you receive a statement Notify the pension plan administrator of changes in personal information such as address, phone numbers, marital status, beneficiaries, etc. Plan to attend your pension plan’s annual general meetings and information sessions Be aware of your employer’s responsibilities, your responsibilities and discuss these with co-workers

9. 3.Compliance issues Types of non-compliance –Ignorance or misunderstanding of the Law –Unclear or fundamentally impractical legislation –Intentional non-compliance due to indifference, greed, philosophical belief or belief the Law will not be enforced or lacks serious consequences Examples of non-compliance –Employer does not establish a pension plan or doesn’t enroll employees in an existing plan or take deductions –Employer deducts contributions from wages but does not remit to the pension plan –Employer doesn’t remit within time limits required –Failure to comply with orders or directives of the National Pensions Office –Failure to comply with technical aspects of the Law Investment restrictions Treatment of non-residents Application of Law to international pension plans

10. 3.Compliance Issues

11. 3.Penalties Offence (section of the Law)Repercussion Not providing a pension plan or not making contributions for an employee (4(2)) $5,000 on summary conviction, $10,000 on indictment Administering a plan that has not been registered (6(5)) $5,000 on summary conviction + additional $500 a day Failure to pay contributions within timeframe given by Superintendent (48) $500 for each day contributions are in arrears Failure to comply with Superintendent’s request for information in timeframe given (81 (4), 82 (3)) $1,000 on summary conviction

12. 3.Penalties Offence (section of the Law)Repercussion Hindering or obstructing a person from carrying out duties under the Law (88(2)) $1,000 on summary conviction Contravening any other aspect of the NP Law including orders issued (90 (1)) $5,000 on summary conviction Failure to pay contributions into a plan (90 (2)) Court orders payment with interest at the rate of the CI Prime Rate + 5% compounded daily.

13. 4.Types of Pension Plans Two Basic types of pension plans –Defined benefit – very few, usually an International Employer Career average Final average Rolling average –E.g. 1.5% x salary x years of service = annual pension –Defined contribution – all the current multi-employer plans operating in the Cayman Islands Employee’s contribution Employer’s contribution Investment earnings –E.g. sum of funds = money available to purchase pension (many different options) Employer chooses type of pension plan Employees need to be consulted and choose the actual pension plan

14. 4.Types of Plans - Pension Plan Providers Fully Compliant: –Cayman National Pension Plan –Chamber of Commerce Pension Plan –Fidelity Pension Plan –Silver Thatch Pension Plan To be Compliant: –British American Pension Plan –British Caymanian Pension Plan

15. 5.Results of 10 Years of Operation

16. 6.Benefits Available Retirement Normal Retirement Age: 60 Early Retirement Age: 50 After normal retirement, persons are not required to contribute to the plan but may continue if they want to.

17. 6.Benefits Available Death Benefits Pre RetirementPost Retirement Married with or without kids: all benefits to the spouse – not the kids Married with kids: 100% paid to spouse with 50% for the kids. Married without kids: spouse Unmarried: Named beneficiary

18. 6.Benefits Available Refunds –Law does not differentiate Caymanians and expatriates –Amounts under CI$5,000 Plan’s discretion to pay Your trust deed and rules govern this provision Why are these people being sent to the NPO? –Amounts over CI$5,000 3 requirements –Employment must be terminated –No contributions for 2 years –Residence ceased (absent for 6 months)

19. 6.Benefits Available Payments Due to Illness Permitted under s. 40 –“A pension plan may provide for the payment of greater benefits under the plan to a member whose life expectancy is likely to be reduced because of the mental or physical disability of that member.” What does your trust deed say? Keys words: “may provide” – not required “likely to be reduced” – major illness Our policy: –Doctor’s letter which attests to the illness and its impact on life expectancy

20. 7.How much is Enough? United States AON Consulting / Georgia State replacement ratio study (2001 edition) –69% to 78% of gross salary for salaries in $30,000 to $90,000 range –Higher %’s for higher salaries Historical range 60% to 85% Canada CIA 1995 study –70% to 80% of gross salary –75% to 100% of net salary Recent analysis suggests as low as 50% of gross salary for middle to high income earners General consensus – 70%

21. 7.How much is Enough? Cayman Islands –Consultancy Report March 2007 based on CI’s 2005 Annual Economic Report and CI’s 2004 Compendium of Statistics Someone currently earning $30,000 would require 70% to 75% at retirement for minimum benefit adequacy For someone earning $60,000 replacement ratio for minimum benefit adequacy would drop to 55% to 65%

22. 7.How much is Enough? Pension Plan / Individual Goals Other issues / Factors too consider Is it possible to save too much? Depends on individual circumstances Need to balance current and future needs Is the return on investment worth it? Other sources of income Replace all or a portion of net salary Prioritize pension plan features Form of lifetime pension / survivor benefits Indexing Retirement rules / ages Consider salary level, work pattern and typical career of plan members

23. 7.How much is Enough? Pension Plan Goals Other issues Expenses that may increase Health care Leisure activities Expenses could vary greatly by age Expenses that could disappear or diminish Retirement savings Insurance coverage Expenses associated with children Debt repayment (i.e. mortgage) Work related (meals, transportation, clothing, etc.)

24. 7.How much is Enough? Sources of retirement income – Cayman Islands Benefits compulsory under National Pensions Law (substitute PSPP Benefits) – employer sponsored pension plan Investment income from personal/retirement savings and principal (rental income) Post retirement employment Benefits from Family and Children services Additional sources of income as a result of recommendations and action forthcoming from National Assessment of Living Conditions, if any Highly likely first two bullets only (perhaps 3)

25. 7.How much is enough? Annuity factors from Sagicor – cost per $1,000 monthly income - April ’07) Age Sex/Form of payment 556065 Female Life only GTD 10 year $151,939 $153,158 $142,863$131,723 Male Life only GTD 10 year $141,585 $144,146 $131,144$118,451

26. 8. NPO Website – www.npo.gov.kywww.npo.gov.ky Content for: –Employers –Employees –Administrators –Press Press Releases More about the NPO –National Pensions Board –Complaint Procedures –Document Library – reports, presentations Miscellaneous –FAQ’s –Forms – refunds, transfers, complaint forms –The National Pensions Law and Regulations

27. Questions ???????????