News
Treasury passes the pension gratuity buck to State banks
The decision by the Government to effect pension Gratuity Payments (GP) to public sector retirees via State banks will pave the way for the Government to utilise the money for development work, said Public Administration Minister, W.D.J. Seneviratne.
“The Treasury, annually, has to allocate billions for GPs. But, by allowing State banks to release GPs, Government can utilise the money towards development work in the country,” he said.
State sector gratuity is a lump sum of 24 months salary that can be obtained by the pensioner after retirement. Previously, GPs were made only by the Pensions Dept (PD). GPs are deducted on a monthly basis for a period of 18 years.
Pension circular No. 04/2014 of March 26, issued by the Director General of Pensions, S.S. Hettiarachchi, stated that, in order to expedite pension GPs to retiring public officers, it has been decided to implement an alternative method to pay gratuity through State banks, namely, the Bank of Ceylon, People’s Bank and National Savings Bank.
However, experts fear this will result in a huge strain on the State banking sector, with about Rs 15 billion to be paid annually as gratuity.
Former Chairman of Ceylon Chamber of Commerce and good governance activist Chandra Jayaratne said, this decision is most likely shifting of burden from the Treasury to State banks and that, the circular raises some critical concerns including whether outstanding loans in the books of the specified banks be deemed to be a debt due by the State.
“Inconsistency and lack of sustainability in State policy has been evident. This can be an attempt to artificially keep the Budget deficit down- as a measure of window dressing,” he said.
Mr Jayaratne said the issue arises whether the basis of computing the loan amount, loan recovery extent, terms and loan recovery period continue to be the same as at present.
“It is also a concern whether the banks are extending the loan on behalf of the Government, and will receive interests and recoveries from pensions from the Government,” he said.
The circular has been forwarded to all secretaries to ministries, chief secretaries of provincial councils, heads of departments, district secretaries, commanders of three armed forces and divisional secretaries.
Meanwhile, trade unions in the State sector demand Government cancel the circular, charging that, the move is an attempt to put an end to pensions.
On Wednesday, hundreds of State employees, trade and labour unions from Health, Administrative, Education, Transport and many sectors gathered in front of the PD and demanded authorities cancel the circular with immediate effect. Education and Health sectors have the highest number of government employees.
“If one obtains a gratuity from the PD, one should pay back only 60 per cent on a monthly basis. But, when it comes to banks, the pensioner has to pay the total amount. At the beginning, they will say there is no guarantor, but what if they do, in another few years. No one will be willing to be a guarantor for a 60-year old,” Ceylon Teachers Union, Joseph Stalin said.
He said, previously, there was a five-year loan for State sector employees at 4.5 per cent interest, and the balance was to be borne by the State. However, he said, the loan was discontinued as the Treasury failed to pay.
The circular states that the pensioner can either obtain gratuity through the PD, or from one of the State banks. The gratuity paid to the pensioner will be recovered within 18 years without interest, and the outstanding amount of the pension gratuity of a pensioner who dies before completing 18 years, would be borne by the government.
Health Services Trade Union (HSTUA), President, Saman Ratnapriya, said that 18,000 pensioners have not received their gratuity for several months, as the Treasury has not released the required amounts to the PD since the last quarter of 2013.
“State banks want the Treasury to pay 10 per cent of the GPs. But if the Treasury fails to pay, GPs will be stopped. Every month about 2,000-3,000 retire,” he said.
Treasury Secretary, Dr P.B. Jayasundare said the intention to introduce this system was to expedite the GPs and avoid delays at the PD.
He said there is no need for a guarantor, as the pension account is sufficient, and that, if the retiree dies, the outstanding amount will be borne by the government.
“At present, there is an outstanding of Rs 10 billion in GPs. If the pensioners are getting it from the State banks, the Treasury will have to pay a 10 per cent interest, which is Rs 1 billion,” he said, adding that, it would not be a burden to the State banks.
Annually, about 20,000 persons retire from the public service.