Editorial: The tricky issue of dipping into pensions savings

Faced with an unprecedented situation that has caused unexpected demands on government’s finances to fund social and other programmes, the current administration with the support of opposition lawmakers are granting people access to their pensions to help cushion the blow of the economic fallout brought on by the COVID-19 crisis.

Government found itself in the proverbial situation of being stuck between a rock and a hard place. Looking at the unfolding situation, it was clear that some sort of social safety net would be required, at least in the short term, for those in the community living paycheque to paycheque but who otherwise would not require government assistance. Among those are thousands of work permit holders.

With the number of Caymanians needing government intervention to stave off hunger and suffering growing, a decision was needed on how to maximise the use of government funds available for social assistance for the benefit of Caymanians without the additional burden of taking care of “temporary” residents of these Islands. Hence, the decision to allow people to accept their pensions.

Additional to note, with the opposition also proposing the move, the Progressives-led administration was faced with the prospect of paying the political price of telling people they could not have access to their pension “savings” while they endure economic hardships that they could not have seen coming with much notice. It would have been a political disaster to allow expatriate workers the opportunity to access their pensions, while Caymanians were not afforded that opportunity with elections just around the corner.

Make no mistake: there is a genuine need for people to have access to some sort of fund to help them out. However, other options should be considered, although we acknowledge that government’s pockets, though deep, are not bottomless.

The concept of pensions is to help you maintain your standard of living when you reach retirement age. It is tough to know that you have money sitting in a fund for your benefit while you are suffering. However, a word of caution to those seeking to access their pensions that doing so should be a last resort as it will be practically impossible to replace those funds to have a meaningful impact when you’ve reached retirement.