A few days after assuring employers and trade unions that the new private sector pensions scheme would be further discussed before implementation, the government on Friday broke its promise and presented the connected legislation in parliament on a day when only mundane matters were being discussed.
The bill was not presented by Labour Minister Gamini Lokuge but by the Prime Minister, who in fact presented two other bills -- the Overseas Employees Pension Benefits Fund and the Pensions (Consequential Provisions) – all connected to private sector pensions. The second reading of these bills is due to be taken up in Parliament on April 27.
The pensions scheme covering some two million workers and slated to become effective from May 1 has raised nagging questions over its enforcement, in particular as to whether it’s a ‘voluntary’ or ‘compulsory’ scheme and ambiguity over the contribution.
On Tuesday (April 5), when the National Labour Advisory Council (NLAC) met to discuss the scheme it was agreed by all stakeholders including the Minister and Labour Ministry officials that another meeting will be called with the drafters (Finance Ministry) of the bill to further discuss it before being presented to parliament, a trade union official, present at the meeting, said. “At that meeting Mr Lokuge appeared to be ‘clueless’ about its (scheme’s) clear functions,” the official, who declined to be named, said. “This will badly affect workers in Free Trade Zones as many work for five years at a time and move on. The bill says there should be continuous service for 10 years. Furthermore if you break your service, members will get only 60% of their contributions. This is daylight robbery,” he said, angrily.
The NLAC is a tripartite apex body set up to advise the Ministry of Labour on labour policy. It is made up of workers (represented by trade unions), employers (represented by the Employers’ Federation of Ceylon -EFC) and the Labour Ministry and its representatives.
Dr Anura Ekanayake, Chairman of the Ceylon Chamber of Commerce said that they endorsed the views and concerns expressed to the Ministry of Labour by the EFC after a study on the proposed bill by the latter.
“One of the concerns is that it’s unclear as to whether the scheme is voluntary or compulsory,” he told the Business Times.
President Mahinda Rajapaksa, presenting the 2011 budget in Parliament last November, proposed the Employees’ Pension Fund to provide pension benefits to employees in the private sector. Under this, he said, employees and employers will contribute 2 % each (total of 4 %) to the fund. “I also propose that everybody must contribute for a minimum 10-year period to earn a pension,” the President said.
EFC Director General Ravi Peiris said that while the Cabinet Paper submitted to the Cabinet for approval on the proposed scheme ‘is extremely clear that the proposed pension scheme is voluntary - in other words, giving the employee the option to decide whether to be a member of the fund’, the proposed bill is unclear on this critical point.
Also while the draft Bill does not have a clear formula with regard to the actual pensions an employee would receive in retirement, the Cabinet paper has set out some formula for payment. “ The provision in the Bill states that the computation of the pension shall be determined by the Monetary Board of Sri Lanka in consultation with the Commissioner from time to time and declared by Order published in the gazette. This gives an element of ambiguity to an employee as to what his benefits would be in case he wishes to opt for it,” Mr Peiris said.
Trade unions were even more critical of the proposed scheme and accused the government of pandering to the IMF.
T.M.R.Rasseedin, President of Ceylon Federation of Labour (CFL) said the scheme in all its appearances, is a ‘deceitful device employed by the government to meet its commitment to the IMF.’ In a statement, he said the question arises as to whether the project is linked to the various commitment made to the IMF to raise the saving rate and the rate of investment in the country.
Mr Rasseedin said that there is even confusion on the question of contributions. “The Minister (Gamini Lokuge) stated that the envisaged contribution will be drawn from the current deposit in the Fund. The Secretary to the Ministry was of the opinion that the contribution will have to come in as an addition to the current payment to the EPF,” he said.
Kishu Gomes, a well-known corporate personality, believes the government has got its priorities wrong. “In the first place, the government should ensure that all employers are paying EPF/ETF. Often we read in newspapers how employees suffer when these payments have not been made,” he said, raising the question as to whether there is any incremental value to employees from this scheme.
Mr Gomes also pointed out that state pensions is socialist thinking and going back in the ages. “Now people will like to make their own investments and have choices. The world has changed,” he noted.
EFC’s Mr Peiris said no actuarial study has been done of the scheme to ascertain the value-benefit for members. An actuarial study assesses the financial impact of risk and uncertainty and is generally undertaken in the insurance field.
Backing this view, Mr Gomes said an actuarial study is an international norm (for pension/gratuity schemes). Even private companies do this study in computation of gratuity, etc, he said adding that Sri Lanka now has qualified actuarial professionals to handle such a task.
Both the EFC and the CFL raised the issue of the retirement age. “Another important matter that needs to be highlighted is that the retirement age in the private sector is not uniform. It depends on what is agreed and set out in the individual contracts of employment. In most cases, the retirement age is 55 years and not 60,” Mr Peiris said.
Mr Rasseedin said the retirement age in the private sector is 55 years and (under this scheme) the member will be denied the pension for five years. The Cabinet paper, a copy of which was obtained by the Business Times from cabinet sources, says that pensions will be paid after a member reaches the age of 60 years.
NLAC members also complain that they were not made privy to the pensions proposals until last Monday despite repeated requests since December for this proposal to be discussed at council meetings.
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