The Cayman Islands is currently experiencing an exodus of overseas workers looking to leave the autonomous British Overseas Territory before it closes a loophole which currently allows expats to convert their retirement savings to cash before they leave.
The law previously allowed expats to access pension accounts of $5,000 or more once they had been living outside Cayman for six months and had not made pension contributions for at least two years.
From 31 December, 2019, it will only be possible to receive payouts at retirement age. Those who want to take their pensions early must leave the Cayman Islands by the end of 2017.
Fortunately, many residents in the Cayman Islands have been able to seek help and gain expert retirement planning advice for expats from agencies and financial services firms, and many have contingency plans in place. This has meant that the exodus has not been nearly as dramatic as many initially feared it would be.
Nonetheless, the impact of the departures has been felt. For example, The Ritz-Carlton, Grand Cayman is reported to have lost 50 workers, while Fosters supermarkets are said to have lost 20 staff.
There were also concerns that the retirement planning worries for expats in the Cayman Islands would cause devastation in the tourism industry. However, early indications suggest that the fallout is likely to be manageable, although it is not without its challenges.
General manager of The Ritz-Carlton, Marc Langevin said that the loss of 50 workers presented difficulties but that the hotel would manage to cope.
“We will not be as impacted as originally feared,” said Mr Langevin, “and I would suggest that it is due to our proactive approach in communicating and educating our ladies and gentleman. From our early surveys, we had estimated that more than 100 employees were seriously considering leaving due to the new pension law.”
One strategy employers have utilised to try to minimise the numbers choosing to leave is to educate their employers on the advantages of retirement planning for expats. For example, at hotel Westin, staff were able to attend seminars on how to successfully negotiate the new law. This, said the hotel’s manager, helped reduce the number of its employees who made a “knee-jerk reaction … to pick up and leave”.
The fact remains, however, that expats have left the island territory. For example, restaurant group NM Ventures has reportedly lost 10% of its workers, while the Tortuga Rum Company has lost 5%.
Fortunately for those with solid wealth management plans in place as well, as those high net worth individuals on the island, the impact of the change in pension laws is only likely to be minimal. Generally speaking those worst affected are only those lower income workers who are looking to convert their pensions into cash for essential capital projects once they leave the Cayman Islands.
“Businesses are still seeing people submitting resignations,” commented Wil Pineau, CEO of the Chamber of Commerce. “It is having an impact. Any time you lose someone who has been with an organisation for eight or nine years, replacing them is difficult.”