CIBC FirstCaribbean International Bank is exiting the asset management business in Barbados, proposing to transfer the Registered Retirement Savings Plan (RRSP) accounts of its clients to insurance giant Sagicor Life Inc.
However, some policyholders are upset that the notice informing them of the intended change gave too little time for them to make an informed decision.
In the letter notifying account holders, CIBC FirstCaribbean said the decision to exit its Barbados-based asset management business was not made lightly. “At this stage our main goal is to ensure that there is a seamless transition of your arrangements with us to whichever option you choose,” the bank said.
The financial institution went on to inform clients that arrangements had been made with Sagicor Life Inc., who is a RRSP provider, to take over the portfolio should they choose that option.
The options are to withdraw the contributions, agree to the transfer to the Sagicor, or transfer the funds in the account to a RRSP with another service provider. Transferring to another RRSP provider will not attract the 25 per cent tax penalty.
However, some account holders have been caught off-guard by the deadline for a decision to be made and the penalty they could incur should they miss the deadline.
According to the notice dated October 1, 2021, if the holder of the RRSP wished to have it transferred to Sagicor, they are to fill out the necessary application form and the related onboarding documents and send them to an email address provided “no later than November 1, 2021”.
However, those who vented their frustration to Barbados TODAY complained that they only received the notification at the end of October.
“I received the email on October 21,” said one RRSP client.
Further, the letter to the clients said “If we do not receive a withdrawal or transfer request from you by November 8, 2021, we will understand you to require a transfer of assets (less 25 per cent withholding tax) and we will communicate with you further in this regard, if necessary.”
One customer approaching pension who has a RRSP with CIBC FirstCaribbean told Barbados TODAY “The very limited time period given to understand this legal document, consider the options and fill out the copious documentation required concerns me, as many RRSP holders will miss the deadlines, or in their hurry, misunderstand the consequences of the stated options.”
According to the financial institution, the portfolio includes Government of Barbados securities.
“You would be pleased to know that we reached an agreement with the Government of Barbados on an option that allows special treatment for those securities in your RRSP given their long-dated and illiquid nature,” it said.
The correspondence also said there were several options available in this regard including a transfer of the securities or liquidation, which would be done at “current market values” and would be subject to 25 per cent withholding tax penalty on the value of the portfolio.
If the holder of the RRSP decides to transfer it to Sagicor or another RRSP provider they would not be subjected to the 25 per cent withholding tax, but the government securities would be sold at “current market values”, and where there is no purchase of the securities they would be transferred into an account in the name of the holder of the RRSP and attract the 25 per cent tax.
Another option allows for the government securities to be “split into two parts” if the RRSP is transferred to Sagicor or another RRSP provider.
This means the securities could be liquidated and the proceeds transferred to Sagicor or the RRSP provider, or the securities could be held in the name of the client by the Central Bank “and as interest and principal balances come due, funds will be transferred to the RRSP provider registered at the time of transfer”.
“This option means that you need not sell the Government of Barbados securities at current market values,” the letter noted.
Expressing concern that there was no mention of an application to the Financial Services Commission and no publicity to inform RRSP holders of what was coming, one woman told Barbados TODAY there seemed to have been an attempt to “cloak the arrangement in privacy and secrecy” given the tight deadlines. “In this, the Government is apparently complicit,” she added.
“If the legislation allows what has happened here, then it seems to me the law merely limits the pensioners’ rights to use their money, but provides no protection for those funds from the whims and fancies of the fund provider – I doubt such careless legislation is the case.”
Earlier last month, CIBC FirstCaribbean indicated that it would be selling some of its operations in four Eastern Caribbean states, valued around BDS $41.4 million.
The bank announced that its wholly-owned subsidiary, FirstCaribbean International Bank (Barbados) Ltd. had agreed to sell its banking assets in St Vincent and the Grenadines, Grenada, Dominica and St Kitts & Nevis.
marlonmadden@barbadostoday.bb
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