Sri Lanka needs to provide non-contributory, state funded pension schemes
View(s):While the Government is unlikely to commit to funding pension schemes, ultimately it will be forced to do so by political pressure when the numbers of those not receiving old age pensions reach significant proportions. “It is better or more prudent to strt designing a non-contributory, state- funded basic old-age pension for all above 65 years of age now instead of later by force of circumstances,” says T.M.R. Rasseedin, Deputy General Secretary, Ceylon Federation of Labour (CFL).
He was making a presentation on “Decent Work in Sri Lanka – A Trade Union Assessment.” at a national consultation on pensions organized in Colombo by the Institute of Policy Studies (IPS).He said old age social pension is of current importance as Sri Lanka is one of the fastest ageing societies in the world with the average life expectancy of a Sri Lankan being 75 years today. Old age dependency ratio is 21 per cent today and expected to increase to 29 per cent by 2030, he said and discussed at length the ILO definition of social security.He said the ILO definition considers this as the protection that society provides for its members through a series of measures.
“The term is used mostly in the context of insurance type of schemes. In my view such type of schemes are not going to be sustainable to bring pension benefits to the elderly. Of course the ILO also stands for both public and private measures including non-contributory provisions that includes tax funded social security programmes. I am inclined to view the matter from the angle of the input of labour in turning the wheels of the economy from which the entire society benefits. It is work i.e. labour (HR) that is at the centre of economic development and growth.
Labour, i.e. Human effort, produces value, profits, creates wealth. More and better machinery, higher levels of technology, labour saving methods, production lines, automation and a whole host of such advances contribute to the increase of the capital stock standing behind each worker. However, the worker’s own contribution too is rising due to higher productivity. Through taxation the value so created filters to the larger benefit of society. All of us as a members of society, contribute our share through our labour in one form or another to this value/ wealth creation. So, in our old age we are entitled for life-time support to sustain ourselves not as a measure of charity but as a matter of right,” he added.
On the elderly population, Mr. Raseedin noted that the elderly has through the years paid taxes on commodities that has purchased or consumed as everybody else has. An elderly person pays taxes on all he has consumed or used to be able to work and live as a useful member of our society. One way or another he has contributed to the national budget. Thus the old age pension becomes due to him as he has already contributed to the financing of the pension scheme and therefore pensions to the elderly should come through a scheme financed through public funds and for life and indexed to inflation and cost of living and treated as a fundamental right to ensure dignified living, he said.
“Most countries have public pensions for the elderly. The arguments I advanced in support of non-contributory pension for the elderly viz. the labour share in value and wealth creation and contribution to the national budget provide a rationale for the government to mandate a pension to the elderly. There is clear evidence from a range of countries that the simplest and most effective form of pension for countries with significant levels of poverty and informal employment is a non-contributory universal pension paid out of government revenues. Evidence from various countries implementing large scale social pension schemes indicates that the costs are 1 to 2 per cent of GDP. Where we are concerned it should be both feasible and affordable,” he said.