Sri Lanka EPF payouts too poor for pensioners to survive: World Bank
ECONOMYNEXT – Payouts by Sri Lanka’s biggest state-run pension fund, Employees’ Provident Fund (EPF) are to poor for pensioners to survive on retirement, a new World Bank report has said.
According to the bank’s Sri Lanka Development Update, in some cases the average pay-out from the EPF might only yield an income of about 2,650 rupees a month – below the poverty line – over a 23-year life expectancy at the retirement age of 55 for men.
For women, who live longer, it’s worse, with the EPF payout yielding only 2,130 rupees a month if they retire at 50.
The EPF is an employer-based, defined-contribution savings scheme for formal private sector workers, covering about a third of the labour force.
“The EPF has relatively good coverage among the formal sector, but it plays a limited role in financing retirement for most workers,” the Word Bank report said.
“It provides a relatively small benefit, at too young an age to support an adequate retirement as Sri Lankans expect to live to an age of 80 at age 55.
Retiring members received a lump sum averaging about 579,000 rupees in 2016, which is equivalent to about 1.4 times the average annual per capita income of employed household members.
Since the payment is made as a lump sum on retirement, workers must invest and manage the funds personally if they wish to take an annuity, the report said.
“Anecdotally, many retirees exhaust the full balance within a few years.”