ECONOMYNEXT – The practice of Sri Lanka’s elected ruling class to appoint family members as personal staff to get a pension for life after five years may end if a proposal to have a contributory pension scheme for all state workers from January 2016 is implemented.
Analysts say the pro-state Janatha Vimukthi Peramuna, which supports increased state burdens on the self-employed and private sector workers will be a key obstacle in ending this feudal-style privilege for state workers, the elected ruling class and their relatives.
Sri Lanka’s private sector workers and their workplaces in particular are taxed heavily to provide a defined benefit to state workers and politicians, who do not contribute anything from their salaries towards the pension, unlike private citizens.
"Honourable Speaker, the cost of providing pensions under the present unfunded pension system of the government has expanded significantly over the years," Finance Minister Ravi Karunanayake told parliament presenting a budget for 2016.
"The rapid aging of our population and related developments have aggravated this issue.
"Thus, re-evaluation of current pension has become a priority, while undertaking that the government will continue with the existing pension scheme for the government employees, a new contributory pension system will be introduced to new recruits to the public sector from 01 January 2016 which would ensure a pension at their retirement.
"The contributions will be directed to a Public Pension Fund."
While ordinary state workers have to work for two decades or more to qualify for a pension, the elected ruling class and a few close associates qualify for a pension after only five years in office.
Directly as a result of this feudal-style tax spending privilege, minister and member appoint their wives and children as personal staff, promoting nepotism.
It is not clear however whether the current administration would be able to end the feudal style privilege for the elected ruling class and state workers as parties like the Janatha Vimukthi Peramuna which promote tax-spending and privileges for state workers and politicians.
Fellow legislators in parliament protested as Karunanayake read out the budget proposal.
"This will also apply to ministers from January," he said. "It will only apply only to new recruits, everyone who are in the public service will get the pensions."
The United National Party, attempted to create a contributory pension fund which would have ended the feudal-style privilege and nepotism but it was fiercely opposed by the JVP in particular.
At the time the general public was also unaware that they and their children were bearing a massive burden.
Countries such as Singapore has a single provident fund (CPF) where tax-spending state workers, the elected ruling class and ordinary citizens are treated equally.
But in Sri Lanka, the tax spending elected ruling class and state workers are given a pension from taxes charged from the working population without any funding.
Economists have estimated the unfunded pension liabilities on the people to be equal to one third of the national debt or25 percent of gross domestic product. (Colombo/Nov21/2016)