Independent public trust to manage state pension funds
Amidst growing protests from trade unionists and opposition politicians, the government is gradually going ahead with employees’ retirement benefit reforms.
The Employees’ Provident Fund (EPF), Employees’ Trust Fund (ETF) and the government pension scheme will undergo drastic changes under this initiative phase by phase.
These reforms are aimed at improving the efficiency of management in the EPF, ETF and deliver pension for life for public and private sector employees, official sources disclosed.
The state will introduce necessary regulations to set up a public trust to independently manage the ETF and EPF by amalgamating them to create a new national pension fund with a value of Rs.1.88 trillion, a senior Treasury official said adding that this was announced in the 2017 budget as well.
However any changes to these funds should be made in consultations compromise and consensus with private sector employees, Anton Marcus, Joint Secretary of the Free Trade Zones and General Services Employees Union told the Business Times.
He noted that the government is planning to bring regulations one by one gradually to gain their objective but trade unions will keep an eye on each and every new development in matters relating EPF and ETF.
Labour Minister John Seneviratne has told the National Labour Advisory Council (NLAC) meeting recently that the regulation to amalgamate the EPF and ETF has not been devised as yet, Mr. Marcus disclosed.
He noted that trade unions are in one voice against any attempt to introduce contributory pension scheme for the private sector creating a new national pension fund.
Mr. Marcus emphasised that trade unions will agitate for a referendum if the government plans to go ahead with this proposal.
The Finance Ministry will initiate a process to streamline all databases maintained by the EPF, ETF and the Labour Department, together, with the proposed Central Pension Fund as a major step towards retirement benefit reforms.
This was like preparing the ground work gradually for the amalgamation of the two funds, he pointed out adding that this was brought to the notice of the Labour Minister at the NLAC meeting recently.
A new legislation on the regulation of superannuation funds other than the EPF and ETF is to be introduced providing provisions to set up  a regulatory body towards this end. In a most recent development, retired employees who are engaged in some other employment with EPF benefits have been facing difficulties in withdrawing their EPF money as the Labour Department is allegedly delaying the clearance of their applications citing data base issues, several employees complained.
The Inter Company Employees Union alleged that the EPF is facing cash flow issues as a result of the recent bond scam and other unprofitable investments in private firms and acquiring ownership of commercial banks.
It has invested members’ money in companies like PC House, The Finance Company, SriLankan Airlines and Hyatt Regency in Colombo, the union said expressing fear on the safety of employees’ lifetime savings.
JVP leader Anura Kumra Dissanayake has noted that the bond issue alone has caused a loss of Rs. 14.9 billion.
According to the EPF Annual Report for 2012, the reserves have been depleted by Rs. 29 billion. Recent statistics have not been published so far and only the 2012 /2013 annual reports were presented to Parliament up to now.
According to Treasury statistics, there were 156 Approved Provident Funds and Contributory Pension Schemes (APPF) with 168,900 members in 2014.
The total assets and investments of these APPFs were Rs.151 billion and Rs. 117 billion, respectively, at the end of 2014.
The existing regulation and supervision of APPFs by the Commissioner General of Labour is weak, and therefore, the savings of members in such funds could be at risk, a Treasury official said adding that a new regulatory and supervisory system with prudential and governance standards is essential to ensure the safety of member funds.
Meanwhile the government has already taken measures to manage pension liabilities by implementing a new contributory pension scheme replacing the current defined benefit scheme for any new recruits to the public service, Labour and Trade union Relations State Minister Ravindra Samaraweera revealed.
This was clearly indicated in appointment letters of new recruits to the public sector stating that the employee should abide by the decisions taken by the state on pension scheme with effect from 2016, the Public Sector Pension Protection Centre has said noting that they are contemplating an agitation by public sector employees to protect their pension rights.
The number of public sector employees is in the region of 1.4 million with almost one public official for every 15 citizens in the country.
Even with such a massive public sector cadre there are shortages of staff in schools hospitals and several other state institutions and the Treasury has undertaken a public sector cadre review to tackle this situation, the official said.