No need for pension swap
Posted on Tue, 08/31/2010 - 21:33 in Headline News
(CNS): A motion filed in the Legislative Assembly by the government’s George Town backbench MLA, Ellio Solomon, is both completely unnecessary and nothing more than a political manoeuvre, the opposition has said. Alden McLaughlin criticised the motion by Solomon which proposes to allow Caymanians to swap their pensions for a home loan and take up to $35,000 from their pension to use as a deposit for a house or land. The former Cabinet minister said there are already various schemes in place to help people find capital for property and that there is no need to encourage them to put their pensions at risk.
The opposition member for George Town pointed out that the government’s mortgage guarantee programme is just one example where the government is already helping people with deposits for their own home. McLaughlin said he could see no reason why people should have to take money from their pensions to buy homes as there are lots of ways that government is already assisting and guaranteeing people to get mortgages through other means.
Only last week two more banks joined the mortgage assistance programme, which eliminates the need for Caymanians to have a deposit so long as they can meet the full mortgage payments, which is essentially doing the same thing as Solomon has suggested.
The private member’s motion, which has been tabled in the Legislative Assembly by former radio talk show host Solomon and backed by Bodden Town MLA Dwayne Seymour, asks the government,of which he is a member, to consider amending legislation to allow Caymanians to make a one-time withdrawal of up to CI$35,000 from their pension for the sole purpose of providing a deposit to a local financial institution towards the purchase of either a parcel of land, or the construction of a new home or an existing residence or apartment in the Cayman Islands.
“Given the range of programmes in place to assist first time Caymanian homeowners, this seems hugely unnecessary and merely a political manoeuvre,” the PPM member stated.
McLaughlin explained that the Government Guaranteed Home Assisted Mortgage, or GGHAM, which was created by the PPM during the last administration, had been established for the very reason of dealing with the deposit problem. He said first time buyers could get up to $200,000 without a deposit under the scheme and some 260 people have already taken up the offer and more money had just been pledged to ensure the successful programme would continue.
He said there were other schemes as well, such as the removal of stamp duty for land under 75,000 and other guarantees to assist Caymanians with property acquisition who could afford to pay a mortgage.
He said that taking money from your pension at 25 may seem beneficial but would lead to problems down the line and government was already heavily burdened with the needs of those who had ended their working lives with insufficient coverage.
“I know things are hard but this proposal makes no sense,” McLaughlin maintained and said the more pressing problem was helping those in homes keep them, He claimed this scheme did nothing to assist those who owed property who were trying to save them but was about creating new home owners.
McLaughlin said it was a radical proposal to take money from a long term investment such as a pension when there were several other avenues that potential home owners could pursue.
Solomon has argued in other media that home ownership was about people’s future and if they owned a property at retirement that would be half of their living expenses taken care of when they were pensioners.
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CNS: Any update on this in
CNS: Any update on this in the house? I've been looking but haven't seen anything on it.
Also something for people who do not know what is actually happening on the ground floor. You know the precious NHD system? Well many banks are tapped out on the program already as they have reached their 5Mil threshold. So this might well be the only way some people will get a home.
CNS: The motion was passed but there are no details on what happens next -- the motion was just proposing that government look at the possibility. Rolston Anglin said Thursday that the pension law is being fully overhauled
Go ahead, listen to a man who
Go ahead, listen to a man who led this country into its present sorry financial state. My God , it's like listening to the slurred words of an alcolholic proffering advice about how to give up the bottle. Alden, exactly how idiotic do you assess the people of the Cayman Islands to be, pray tell us.
Can we hear a testimonial
Can we hear a testimonial
A home will not miraculously
A home will not miraculously translate into a steady income once you retire. There will be NO inflows of money coming in from your home once you are no longer working.
Realistically at the levels of salary the traditional working class Caymanian makes you are talking about appx $1,000-$3,000(depends on current pension levels, life expectancy, rate of returns etc)/month once you reach the retirement age of 65. That is hardly enough to have much quality of life as is. So with as little as our current pensions untouched will return to us. Can you imagine once you dip into that pool of funds how little there will be left to sustain you for the next 10-15 years? What happens then ---------- SOCIAL SERVICES ie Government will have to bear the burden for all those "entitled" to owning a home and who cannot afford the down-payment. We are already aware of the financial difficulties that we are in. With no additional revenue streams and constant wasteage and mismanagement of government funds, I for one will NOT be depending on any hand outs from Government because there wont be anything to get.
Government should not be encouraging this short sighted, entitlement way of thinking. Caymanians need to break free from the strangle hold of being entitled and learn to earn their way. As a Caymanian myself those comments are aimed at those who should know who they are. It is not idle talk that there are several personal loans taken out to fund vacations!!! Yes people there IS something wrong with taking out a personal loan to fund a vacation!!!! We have to learn from our grandparents and great grand parents who took great pride in working hard for what they had. If you cannot afford the down-payment, then do what most hard working non-entitled people would do-SAVE!!! Set a goal and work towards it.
So not only will I not touch my pension, I am also setting aside extra money to supplement the measly amount that I will be getting in the first place. I am also doing my children a favour by teaching them prudent money management skills. We are woefully lacking as a Country in this area., but that is whole other can of worms!
Pardon me, are we saying that
Pardon me, are we saying that home-ownership from as early an age as possible is somehow disadvantagious? And that paying rent for longer than necessary is somehow condusive to future financial well-being? For God's sake, get yourself on the property ladder asap, you twenty/thirty (and later!) somethings, and look forward to (total) home ownwership as soon as you can to your retirement age. And another thing, forget the luxury trappings when you build. You can save up for them rather than pay for them over 30 years on your mortgage (the bank won't concur, of course!). Do you really believe that the reduction to your monthly pension remunaration in thirty years time - if you were to drawdown on the pension deposit at present to enable you to pay a deposit and get on the property ladder - would somehow leave you worse off? Folks, no investment fund (eg your pension contribution) ever outstrips - in the long run - property value appreciation. You will always end up further ahead having made mortgage payments. I retired at 51, having bought my first home at 25 on a mortgage, and am now (by the Grace of God) living in a $1.2 house paid off, with two other properties on mortgage and rented, and a piece of land on Little Cayman paid off. Believe me, property ownership, at whatever level, it really doesn't matter, is your passport to success and future financial security. Start investing folks, and all the best. PS At least invest in a piece of land somewhere (no insurance and steady appreciation!)
"no investment fund ever
"no investment fund ever outstrips - in the long run - property value appreciation." - Just nonsense. Most equity based investments vastly out perform property in the long term. Investing right now in property in Cayman is riskier than a night out in Vegas.
WRONG WRONG WRONG WRONG
WRONG WRONG WRONG WRONG WRONG.
You are so far off cue it's not funny.
Investing in a home will almost always pay off. For now you think about your pensions and how much you lost because you withdrew some but think about having to pay rent still when you are 60.
There is NOTHING and I say NOTHING better than having your own property paid off at 65 when you retire. This for a second how much you will get back if you do not do this per month. Now take away from that outflow of funds CI$1,200 to CI$1,600 a month in rent. How much are you left with monthly?
If you own your own place you are only covering utilities and food and odds and ends monthly as opposed to having to pay for shelter.
You are a very short sighted person with literally NO END GAME clue at life.
So what is it? Are you planning on staying with your children when you retire? You know how much strain that places on your kids? You know how many kids out of say 10 wants their inlaws staying with them? The answer is 0.
Stop the BS. If a person has a chance at getting their home GIVE it to them. It is actually a better alternative Social Services wise in the end.
Your pension money is YOUR
Your pension money is YOUR money. There is no particular reason in this tax free jurisdiction for it to be inaccessible for years--except as a form of forced savings to avoid the necessity of public welfare payments in the future (also, apparently, to produce fee income for the administrators.) To the extent that the money is used to help people into home ownership it has the same effect by helping them acquire shelter for their declining years without reliance on the government. It is difficult to make a case that market investments are safer or more reliable than home ownership IMO so what is the problem? Oh, I know what it is--the people are too stupid to be allowed access to their own money. That seems to be the underlying point of the thumbs down.
Of course it is your money.
Of course it is your money. Your employer took 5% of your salary, probably against your will, matched the deduction and gave it to a pension fund to invest.
After many years off poor market returns, your pension has grown to $35,000.
Now tell me why it is a good idea to give you this lump sum that has been save up using 5% of your salary when you have saved absolutely nothing from the 95% of your salary that you had full access to over the years?
If this proposal goes
If this proposal goes through, then anyone taking advantage of it should have to sign a binding agreement with the Govt. that they will abide by the Social Services requirement to give the Govt. a lien on their property should they require financial assistance in their old age. Maybe the lien should be from the beginning.
By the way how is this to be controlled? What if pension funds are removed, a property purchased and then sold in the future? What will happen to those funds? Who will control/guarantee that they are reinvested into another home, etc.?
This whole concept brings us
This whole concept brings us full circle back to what got us in this mess in the first place, the old Caymanian tradition of having to have what we can't afford.
Rest assured that if you can't afford the down payment, you certainly can't afford the insurance premiums and ongoing upkeep cost. You are better off renting and there is plenty available!
Leave your pension alone, one day you will be thankful as unlike all those who went before there was a pension requirement and are now a financial burden on society, you will at least have something to live off of in your retirement years, even if it's not much.
"You can't always get what you want"
ahhh Elio, It's not as simple
ahhh Elio, It's not as simple as you thought is it? Here is the Man whom, as a radio talk show host, turned people against the new schools and education reform and promised to be the champion of first time home owners. Well, guess what? He is now coming to the realization that he is not as smart as he thinks. He has no answers for our issues. His best proposal after being elected is to "talk" those that are uninformed out of their pension in an attempt to score political points.
Forget who introduced the
Forget who introduced the motion, PPM/UDP or Ind we must develop a simple long term solution to inject capital spending into the economy. When people have employment they are more likely to spend on the local economy. If we give more persons an opportunity to build/own a hope we can begin to see stabilisation of our economy when people have something to work for/towards.
In terms of stability, if a person owns a home the effort to keep the current employment or seek to improve their financial position becomes a reality if you give a person opportunity they can then move on to another goal and another. The mind set of individuals is not to do the minimal regardless of the purpose behind the goal.
Then maybe the pension schemes could get off their a$%*s and invest locally to drive the economy. Ive never head of a bank operating at a loss im sure they pick similar investments. Course if I'm wrong please feel free to correct.
So I say go for it but ensure that the low had no room for abuse.
I have a 2 bed 2.5 bath town
I have a 2 bed 2.5 bath town house for sale 1,350 sq ft- Ocean Front Porperty, tennis court etc - going for $170,000 - anyone interested
I'm interested. Is it
I'm interested. Is it hurricane proof?
It has hurricane shutters :-)
It has hurricane shutters :-)
Where do you live Windsor
Where do you live Windsor Village?
No - Prospect
No - Prospect
Property sales heating up
Property sales heating up already!
Good, and a family of two would only need to withdraw $8,500 each to get the 10% of $17,000 for this mortgage.
I'm a financial advisor here
I'm a financial advisor here in Cayman - and in my humble opinion the pension-funds should be considered as "too holy to be touched". The truth is that you shouldn't buy a house if you can't afford it. There were some comments like "people are in debt and they don't qualify for a regular mortgage and as the pension money is their money, they should be allowed to use those funds". Well... the truth is that these people are very bad at managing their finances. They have been so in the past (this is why they don't qualify) and they will do so in the future. What happens is that somewhere down the line the people will not be able to pay the mortgage rates, the banks will have to sell the property to get their money back - and the previous home-owner will be left with no house and no pension. Many people here in Cayman must be protected from themselves. There is nothing more sad then a retired person that has not enough money to live a halfway-decent life.
Life is about choices - and if you want a new SUV and the quarterly shopping trip to Miami and a jet-ski and and and... well, then you can't have the house. If you want the house, you have to save a few years before you have enough money available to do so. If you want everything NOW... then better be prepared for a retirement in misery.
When I hear politicians talking about pension funds I feel immediately sick and scared.
Rubbish! So, why are the
Rubbish!
So, why are the pensions in the USA, Canada and Bermuda not too holy to be touched?
They are -- there are rules
They are -- there are rules that make it stupid to touch, such as a high tax on money pulled out. It's there for a reason and the post above you did a very good job of explaining it.
In actuality, if I remember
In actuality, if I remember correctly, in the US if you withdraw from any tax deferred retirement vehicle (e.g. IRA or 401k) before age 59 and 1/2, there is a 10% tax penalty. So they treat pensions as "holier than thou" too.
What is the real problem to me is that our pensions law limits maximum bond exposure to 40% and maximum stock exposure to 70%. In my humble opinion a device where capital conservation is priority should have those percentages reversed.
I'm no financial expert, and
I'm no financial expert, and have never worked in the financial sector, but I was once part of a retirement plan that invested according to the individual member's age.
In the early years the member's funds were invested in higher risk Growth Funds like stocks, at say 70% and the other 30% invested in a Secure Fund like bonds.
As each member neared retirement age the percentages were reversed so that there was little or no risk of the accumulated funds taking a drastic drop within three years or so of retirement.
In the early years members could set their own percentages, either risking more of less, but as they reached retirement age the were forced to go with the low-risk Secure Fund.
I don't see anything wrong with adopting that model here, and I'm sure it could be done within the Regulations without having to make any changes to the Law.
If capital conservation was
If capital conservation was the priority the PPM would have changed the exposures. The priority has been to ensure that pension administrators make money every year for 40 years and then tell the pensioner they don't have enough money.
Plus taxes at your normal
Plus taxes at your normal rate. You stand to lose about half of your withdrawal making it a last resort sort of withdrawal. Some plans allow a partial penalty-free withdrawal for certain medical or homebuying needs.
So, maybe what the PPM should
So, maybe what the PPM should propose is a penalty on such withdrawals - as is the case in the USA - and not an outright prohibition against using the funds.
This will ensure that the funds are only used in exceptional cases, and after the pensioner has considered all other options.
These countries have taxes,
These countries have taxes, social security etc ie other means of relieving the burden which will be surely placed squarely on Government if this goes through.
What exactly will Government have to cover either the defaulters of these loans or the lack of a decent pension nest egg in the future when they retire??
The idea sounds great in the short term and I even had to stop for a minute and say man this is a great idea but truthfully in the long run the basic premise is the same individuals that we are trying to help and the same individuals pensions came about to protect will be in the same sorry situation because of their CHOICES and thus will become a major burden on society. Harsh but true.
How can PPM say they love
How can PPM say they love Caymanians, but are against them having AN OPTION that would allow them to get a piece of land or home?
Has anyone done the maths?
Has anyone done the maths? The maximum salary for which the 10% (5% employer/5% employee) pension deduction is mandatory, is CI$60,000 - therefore maximum total annual contributions CI$6,000. It would take six years for an employee to reach the proposed figure of $35,000.
Two questions - how many YOUNG Caymanians earn CI$60,000 a year, and how material a sum is $35,000 in relation to the deposit required to purchase even a "starter" home.
Exactly, this shows that
Exactly, this shows that using their pensions, young caymanians could afford the 10% deposit on a $60,000 piece of land within their first year of working.
Excellent idea!
Please help me understand how
Please help me understand how you are not able to save the down payment and pension, obviously based on the fund that would have accumulated relative to the maximun 5% pension contribution an additional 10% should not have been difficult.
Please note you will have to discipline yourself for at least a savings of 10% for maintenance and various contingencies for the home you would own, otherwise the house you thought you owned will be worthless for resale if required.
This is a bad idea!! This does not help in the long run.
Ask that question to the
Ask that question to the average caymanian who pays $1,400 per month in rent - that could be going towards a mortgage if they had the deposit to get one!
Hint: you will need to turn the other cheek
This is a great idea!!! It
This is a great idea!!! It is the first non-punitive idea to come out of govt. in ages. It will stimulate not only the housing market, but all sectors of the economy. Housing drives an economy! It will help put people back to work. It will help Caymanians to stop throwing away their money on rent. It will provide an appreciating asset for purchasers.
Put politics aside - PLEASE.
Two important points are not
Two important points are not mentioned in the article:
1. Putting down a deposit of 35,000 on a loan reduces your interest payments, which is a good thing.
2. Freedom to choose between using the money to buy property or investing in a pension fund - both are long term decisions.
Great idea that's worth exploring.
I am happy to see Caymanians
I am happy to see Caymanians get their homes under the GGHAM program, but I don't need Government to foot the bill for me so the UK can cry about the liabilities of the CIG, what I need is access to MY pension to make an investment for my future.
I support Ellio and Dwayne! - this is an excellent motion.
And Alden can cry all he wants (as if he really cares about the Caymanians) - but this isn't about politics - this is about having a piece of MY country and using MY money to get it.
I believe the UK would be
I believe the UK would be more likely to cry about having to support some fool who lost both his pension and his house because he could no longer afford the house payments.
There is a suspiciously large
There is a suspiciously large number of increasingly breathless comments in support of Mr. Solomon's proposal, so I thought I'd do the next half dozen for whoever is posting them to save them the trouble.
"Thank you Ellio for this really really great idea."
"You're so great Ellio!"
"What a wonderful idea! Why didn't anyone else think of it?"
"There's nothing wrong with this idea It's the best ever. Nope, no drawbacks that I can see."
"Thank you! Thank you! Ellio, you're so marvellous I could just eat you up!"
"Ellio is just so great! I wonder if he has any sisters!"
yep..obviously a plant on the
yep..obviously a plant on the board......
surprised it hasn't happened before.... it would be very easy for any poltical party/person to swamp the comments board with their propoganda
Good post, except that the
Good post, except that the parts about "I could just eat you up" and "I wonder if he has any sisters" makes me wonder whether you are male, female or in a conflict.
But luckily for you Ellio's proposal doesn't discriminate against homosexuals or people with gender conflicts using their pension.
What's wrong with having
What's wrong with having another option to own your own home?
Please Caymanians - for once - support ideas that will benefit you. Real Estate prices are going down. Alden has his house. Kurt has his house. get yours - lets support Ellio.
if the Banks will accept a
if the Banks will accept a guarantee from the Government (which PPM left broke) - why won't they accept a guarantee from the pension funds?
Ellio's idea is excellent and will benefit Caymanians.
It's not a pension swap! The
It's not a pension swap!
The idea is to allow individuals the right to choose how their pension money is invested.
Thank you Ellio! Please
Thank you Ellio!
Please people, don't be divided about this for political reason. This is a chance to provide Caymanians with another option to own a home. Why defeat caymanians having another option to own a home?
Please don't destroy your country because you hate UDP or PPM - support Ellio's plan - its the best hope many will have to own a home.
I believe this is a great
I believe this is a great idea!
Other than some 'long term doom and gloom story' - what has the PPM cited as the negatives to Mr. Solomon's plans?
As I see it: Caymanians get a home; architects, contractors and realtors get jobs; banks lend money (which is how they make money).
Why fight against something that can benefit Caymanians and the economy PPM?
I think it's a great idea.
I think it's a great idea. Your pension is always at risk anyway with the way the stock market plays. So getting some funds right now to buy property is a good, almost risk free investment in my books.....so long as you pay the mortgage.
In other countries people are
In other countries people are allowed to withdraw their money from their pensions to purchase a home! - so why should Caymanians be treated any less?
Some of these replies just
Some of these replies just goes to show the level of bias and/or lack of intelligence exists in the CNS reader base.
Pensions are currently and have been LOSING money for those of you living in wonder land, further not only are they LOSING money, they are losing money primarily OVERSEAS. You can't even say there was a shot are recouperating any of those lost revenues in the local economy.
Anybody advocating either NOT TAKING the pension holiday or KEEPING their money into just about any of the pension funds is an absolute MORON and has no clue as to what is going on! you might as well invest in the stock market. I took the pension holiday because myself and everyone around me was LOSING MONEY. Its safer in a bank, and sure as hell safer in real estate.
to address the idiotic point of a reader below implying that the decline of the real estate market show that the investing in the "current" real estate market is somehow indicative of Ellio's idea being a bad one, is another example of stupidity beyond any measurable proportions. People are SUPPOSED to buy after a decline. You never know when you are at the bottom of the market unless you have some kind of crystal ball. But one this is for certain, real estate will rise again. Your money is SAFER in the long term that in some foreign investment group.
My pension plan earned more
My pension plan earned more than 11% for the year ended 30th June 2010. Have you ever taken the time to research all of the multi-employer plans on the island to see what their returns are? Maybe you are the MORAN for not doing your homework - especially given the fact that you are taking the pension holiday where you are not receiving your employer's 5% share of contributions.
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