Sri Lanka heading for retirement crisis
ECONOMYNEXT – Sri Lanka is heading for a ‘retirement crisis’ with rising life expectancy, insufficient labour participation and inadequate pension coverage, Deputy Minister of Foreign Affairs Harsha De Silva said.
“Caring for the old is going to place a large burden on the health system, especially old age disease and end-of-life care,” he told the National Pensioners Day Symposium organised by the Department of Pensions.
The problem is going to get worse and had been overlooked all these years as the island grappled with a 30-year ethnic conflict.
“Politicians don’t understand the gravity of the impending crisis in old-age care,” De Silva, an economist, said.
There is insufficient labour force participation with participation being 74 percent for males and for females, who live longer, only 35 percent.
“We need to create more jobs to attract more people to the work force,” De Silva said. “More people working means more savings and higher economic growth which will provide the government more money for retirement spending.”
Insufficient pension coverage was another problem. The number of people over 60 years will increase to over 20 percent of the population by 2030.
Sri Lanka has a labour force of 8.8 million people with 8.4 million employed
The bloated public sector of 1.1 million people are covered by government-funded pensions with another quarter million in state-owned enterprises which have their own pension funds.
The formal private sector has the Employees’ Provident Fund covering about 2.5 million people with another 170,000 private sector employees contributing to private provident funds.
“In addition, there are occupational pension funds for farmers, fishermen, three-wheeler taxi drivers – all manner of people for whom we have introduced funds over the years,” De Silva said.
“If you add all this together, there are 3.9 million people with coverage of some form of superannuation which is 44 percent of the labour force. The balance slightly under five million have absolutely no coverage.”
Sri Lanka does not have a universal superannuation system so those outside the labour force have no coverage.
“This shows the complexity of the problem,” De Silva said. “If you’re not in the labour force, you’re not covered. If you’re in the labour force, only a small percentage have cover.” (Colombo/October 08 2015)