Sri Lanka workers promised consultations as fears mount over EPF, ETF merger
ECONOMYNEXT – Sri Lanka’s Prime Minister Ranil Wickremesinghe has promised to consult private sector workers, a report said as fears grow over plans to merge two retirement plans of private sector workers into one.
Sri Lanka’s Lankadeepa newspaper said Wickremamsinghe had given an assurance to several trade union representatives who met him, that no unilateral decision will be taken by the administration over the two funds.
Though spokesmen of the ruling United National Party earlier promised only to remove the Employees Provident Fund from Central Bank control and make its management independent, Wickremesinghe in a policy statement earlier this month said it will be merged with another fund, the Employees Trust Fund.
Calls for independent management of the EPF have grown over the years as awareness grew of how the Fund was used to suppress interest rates by the Central Bank against the interests of the beneficiaries.
Allegations of corruption also grew during the last regime after investment managers made up of people who contribute to the fund, were sacked and questionable investments were made on listed stocks by managers who were receiving a separate central bank pension.
The Central Bank has a serious conflict of interest in managing the fund as it is also in charge of raising debt for the Treasury.
Prime Minister Wickremesinghe in his policy statement also announced a plan to make the Central Bank Governor and Treasury Secretary, who have the most conflicts of interest, as trustees of the merged fund, raising more concerns.
Following a high profile bond scam, which was heavily defended by at the highest levels of the ruling United National Party, the new administration’s there is also a cloud over the credentials of the new administration.
At the moment the Employees Trust Fund Board is managed independently of the Treasury and the Central Bank.
ETF contributions can also be taken out before a worker reaches 55 years, and invested elsewhere such as a house when a worker changes jobs. Apparel workers who leave to get married use it to start a new life.
At 55 years, the balances of the EPF can be taken out.
Meanwhile opposition legislators, who have no stake in the fund and receive a pension out of tax-payer money after working just five years, are also fishing in troubled waters. They want to keep the EPF with the Central Bank.
Sri Lanka’s Janatha Vimukthi Peramuna party, which wants to expand the public sector and whose interests are aligned to state workers and are inimical to private sector workers have also begun to run with the hare and hunt with the hound over the pension plan reforms.
Union Wasantha Samarasinghe, a JVP provincial councillor who heads its trade union, was quoted by the The Island newspaper as saying that the workers would take to the streets if the administration "laid its hands on the EPF and ETF" like the ousted Rajapaksa administration.
There were street protests and workers were shot dead by the Rajapaksa administration when attempts were made to convert the EPF into an involuntary annuity (yearly payments instead of a lump sum), keeping the funds in state control even when contributors were pass the age of 55.
There are fears that the new administration will not allow workers to take out money after 55 years or make the annuity (year payments instead of a lump sum) mandatory instead of optional.
An annuity allows the state to control the funds, destroy its real value by currency depreciation and inflation, and perhaps deny at least a part of it to the proceeds to the contributor while he is alive. (Colombo/Nov17/2015)