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Kinks out of Ex-Gratia Pensions

The Cabinet has addressed some significant shortcomings in the Ex-Gratia pensions system which operates under the legislative authority of the Public Service Pensions Law. The Public Service Pensions (Ex-Gratia Pensions)(Amendment) Regulations, 2011 were issued by extraordinary gazette on 15th December 2011.

The enactment of the Public Service Pensions Law in 1999 brought with it the universal provision of pension benefits to all public servants. By 2001, all serving public servants were enrolled in either the old 'defined benefits plan' or the new 'defined contribution plan'.

Prior to that legislation coming into effect, pension benefits had been limited to Caymanians. However, with various criteria that existed, such as a minimum ten years of service and the different 'terms of service' for different categories of employees, not all Caymanians possessed pension entitlements for all of their years of service either.

The Public Service Pensions Law preserved the facility to recognise and assist such Caymanians through the award of an 'ex-gratia pension' - a benefit that is payable to a Caymanian who served the Government for more than four (4) years and for this period of service, did not earn either eligibility for a pension or any other equivalent allowance, such as the Contracted Officers Supplement.

The Public Service Pensions (Ex-Gratia Pensions) Regulations, 2004 provided for two qualifying periods of service, with corresponding rates of ex-gratia pension, namely:

  • Service of four (4) or more years but less than ten (10) years, $200p.m.; and
  • Service of ten (10) or more years, $300p.m.

In May 2009, Cabinet approved amending Public Service Pensions (Ex-Gratia Pensions) Regulations, 2004 to address the anomalous situation of Caymanians who have served as public servants for considerable periods (greater than ten years) for which they neither received, nor were eligible to receive, any pension or other benefit. Attention was brought to the matter of such persons by an Own Motion Investigation carried out by the Office of the Complaints Commissioner in late-2006. The investigation found that the failure of these individuals to accrue such benefits had been due to them not being Caymanian at the time of that service and not due to any maladministration of the benefit provisions of the public service.

The Public Service Pensions (Ex-gratia Pensions)(Amendment) Regulations, 2009 sought to:

  • Increase the amount of ex-gratia pension that a Caymanian who had served four (4) or more years but less than ten (10) years from $200p.m. to $300p.m.; and
  • Introduce a new means of determining the amount of ex-gratia pension that a Caymanian who had served more than ten years should receive (based on the period of service and the earnings at the end of the period as if the person had been enrolled in the defined benefits plan) but also ensuring that the amount would not be less than $450p.m.

Unfortunately, that amendment did not cater to those persons who were already in receipt of an ex-gratia pension. For persons currently receiving $200p.m., they were unable to have their rate revised to the new rate of $300p.m. And for persons with more than ten (10) years service, they were unable to either have their entitlement recalculated under the new system based on their period of service and their salary or wages at the time their employment ceased, or to have it revised to the new minimum rate of $450p.m. Only new applicants after May 2009 who were successful received the new dispensations.

"This was extremely disappointing to those persons who had served well over ten years and who were keenly looking forward to being able to receive something more to allow them to better look after themselves now that they have retired", said Deputy Governor Donovan Ebanks. "I'm extremely pleased that Cabinet recently approved the Public Service Pensions (Ex-Gratia Pensions)(Amendment) Regulations, 2011 and that these issues have now been addressed and sorted out", he added.

Under the new amending regulations, a Caymanian already in receipt of an ex-gratia pension will be eligible to have that revised either from:

  • $200p.m. to $300p.m. for a Caymanian who has served four (4) or more years but less than ten (10) years; or
  • $300p.m. to the minimum of $450p.m. for a Caymanian who has served ten (10) or more years.

For some of these Caymanians, who have worked for over 15, 20 or even 25 years without any entitlement, the new method of determining their ex-gratia pension based on their period of service and salary at the end will translate into a nice, well-deserved increase.

Extending these benefits will result in an increase in the annual costs of the ex-gratia pensions from just over $400Kp.a. to just under $750Kp.a. Nevertheless, the Deputy Governor feels that it was the appropriate decision for the Cabinet to have taken: "The status quo simply wasn't any longer justifiable. No Caymanian is going to be able to provide for themselves in retirement based on $200p.m. or $300p.m.," Ebanks stated. "The good news is that we were able to completely put an end to earning qualifying service to this ex-gratia benefit 12 years ago. Everyone who has been employed by the Cayman Islands government since the dawn of this new century accrues a pension entitlement and thus cannot accrue an ex-gratia pension entitlement too. But we have to do what is right by those Caymanians who toiled before we had that universal pension benefit."