Sri Lanka needs an old-age pension scheme or some viable system of savings or a method of investment for the aged especially for low income earners to spend for their livelihood without burdening the society. Sri Lanka's already fast rising age dependency ratio is expected to double over the next 20 years while income and poverty in households with elderly people is below the national average - because of family support and because people continue to work into an older age. Therefore it is essential to consider various options for investment or savings with an eye on pensions.
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| Panellists (from left- )T.M.R. Rasseedin,Ravi Peiris and Manjula de Silva |
The Elderly Welfare and Extending Retirement Cover for the elders were among these options as discussed at a panel discussion on the Pension Bill at the monthly meeting of the Sunday Times Business Club held at Taj Samudra Hotel on Tuesday.
Highlighting the need of planning for retirement, Manjula de Silva Managing Director of HNB Assurance noted that everyone should be cautious on "where we need to put our money to get adequate return during the old age."
He said that Sri Lanka is facing serious problem of an increase in the aging population. Within the next 30 years one out of four of the total population will be over 60 years of age.
This will become an enormous problem for bread winners in the families and to the whole country. The family is the main support for old people. Formal old age income support systems have limited coverage, inadequate benefits and are financially unsustainable. Health systems are not ready to address the needs of an aging population. With population aging, the working age population will decline and may reduce growth, he said.
He pointed out that voluntary savings of persons will not sustain long as they are in the habit of spending money to fulfill their desires. People have a tendency of spending almost all of their savings to buy consumer items like Television sets, mobile phones, etc and for traveling overseas during holidays or going on trips. So the savings which was at a certain peak will come down to near zero within some time, this cycle will continue and finally when after retirement of such persons there won't be any money left in their savings accounts. Therefore it is important to plan for retirement and people should look for other options for savings to get an adequate return during their retirement. He said that stocks, long term bonds, life insurance pension plans offered by insurance companies were among these options.
Veteran trade unionist, T.M.R. Rasseedin - President Ceylon Federation of Labour said that trade unions have opposed the proposed private sector pension scheme but the government has failed to discuss it with stakeholders like workers, employers and trade unions. Originally, the pension fund was to be voluntary with no additional contribution from either the employee or the employer. The Ministry of Finance had submitted a Cabinet Memorandum dated 3rd March 2011, to establish a Voluntary Pension Fund for those who are not in receipt of a monthly pension.
The draft bill tabled in Parliament by the Prime Minister was for the establishment of a pension benefit fund with mandatory contribution from both the employee and the employer in addition to the contribution already made to the EPF. This bill had been hurriedly prepared by the Finance Ministry by including 32 clauses out of 51 clauses in the Employees Trust Fund Act. If the contribution to the fund is made by workers voluntary, there might have been some acceptance for it by the workers, he added.
The Fund is envisaged to be established by taking over 10% of the annual profit of the ETF, monies lying in inactive accounts of members of the EPF where such members have passed the age of 70 years. Besides, membership of the fund is made mandatory and a 2% of the gross salary has to be contributed to the fund monthly for a minimum period of 10 years to entitle them to the pension benefits.
At the time of retirement the member is required to forfeit 2% of his savings in the EPF and 10% earnings as gratuity for past services. Basically, the pension fund is being created with workers monies obtained without their consent. The position of members of the fund who have not completed 10 years contribution is not clear, he said.
Sec. 25(3) of the bill states that such members can qualify for pension if they make good the balance payments relating to the relevant period. This includes the employer component of the contribution as well. How could a member who loses employment meet this requirement? he asked. If the member is unable to make this payment he stands to lose all the deductions that were made from him as contributions to the Fund, he added.
Pension is payable at 60 years. The private sector retirement age is 55 years. For full five years members are denied their pension. Presently, the spouse is not made entitled to pension on the death of the member. The dependant children under 18 years of age and physically or mentally retarded are only entitled to a lump sum payment of 60% of the amount lying to the credit of the deceased. The balance 40% is forfeited and the fund gains at the expense of the dependant children, he said.
Ravi Peiris, Director-General of the Employers' Federation of Ceylon disclosed that the International Labour Organisation (ILO) has expressed willingness to assist Sri Lanka on private sector pensions. It is essential to conduct a study on the sustenance of a pension fund.
He noted that his federation was not against the concept of a private pension, although consultations and consensus among all stakeholders are essential in view of the complex nature of some of the issues relating to the relevant bill. The vastly increasing number of elders in our population makes the need for a pension of some sort very urgent, he said.
He pointed out that EPF and ETF payments are not sufficient for retired employees to face the rising cost of living. For a pensioner, with major financial commitments, he has no alternative other than spending of these monies while his financial future is uncertain. But if there is a pension scheme for him, he could face the future with some confidence, he said. It is the bounden duty of the state to protect all its citizens against economic uncertainties and the relevant scheme could adequately serve this purpose if carried out in good faith. The state could do with some critical but well meaning input from sections of the public on the scheme and 'we' believe the common good would be served through an exercise of this kind, Mr Peiris added.
The club is hosted by the Taj Samudra and co-sponsored by Hameedia. |
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