News
Move to transform EPF, ETF into pension funds
Amidst reports of ‘losses’ in investments made in the stock market by the Employees’ Provident Fund (EPF), the Government is planning to transform the EPF and Employees’ Trust Fund (ETF) into pension funds, official sources said. The Finance Ministry is drafting legislation to amend the EPF and ETF Acts for this purpose. The sources said the proposed pension fund would allow a retiring member to take part of the money as a ‘lump-sum’ payment and retain the balance to receive a monthly pension or withdraw his or her entire contribution on retirement.
“The proposals will be discussed with all stakeholders — companies, workers and unions — before any decisions are made and their views taken into consideration,” one official said. Free Trade Zones & General Services Employees’ Union (FTZ&GSEU) convener Anton Marcus said they would propose that the unclaimed EPF money running into billions of rupees be used to set up a private-sector pension fund.
Private sector employees should be given the option to join the pension scheme voluntarily, he said. Mr. Marcus said that the Central Bank should not manage the EPF but it could continue its role as the custodian of the fund. The Auditor General’s review of the EPF report for 2011 says the value of investments made in the stock market in 56 companies and totalling Rs. 54 billion made as of December 2011 had diminished by Rs 11.7 billion as of January 15, 2013, according to news reports this week.
This triggered concern from opposition parties and EPF contributors. Currently EPF contributions can be withdrawn on reaching 55 years while the ETF contribution could be withdrawn on leaving a company or the account transferred to a new company a member is joining. The Government has abandoned its previous attempt in May 2011 to set up a separate pension scheme for the private sector with part of the EPF funds after wide-ranging public protests.
Trade unions have also been demanding a private sector pension scheme in consultation with all stakeholders including employees and employers, the ministry official said.
The move to set up a private sector pension scheme comes as Sri Lanka is likely to face a major economic burden with an ageing workforce, he said adding that it was essential to bring improvements to the operating structure of both the EPF and ETF and find ways to bring into the structure the informal workforce not eligible for any kind of retirement funding.
In less than a decade, according to some estimates, the EPF may find it difficult to meet payments to retiring people, because outflows would rise faster than inflows and the Government is now looking at ways to get higher returns to the proposed pension funds, the official said. Taking past trends into account, he said it was estimated that Sri Lanka would have an elderly population of about 4 million, or one fifth of the population by 2021.
The official said the Finance Ministry was considering a modern fund management structure to secure higher returns for the fund once the amendments were approved by Parliament.