The government has violated the constitution and infringed the fundamental rights of the public sector employees by handing over its liability of paying gratuity to pensioners to state-owned commercial banks, a 4-member expert panel alleged at a public discussion in Colombo this week. By Pension Circular No. 04/2014, the Government has introduced a very unfair [...]

The Sundaytimes Sri Lanka

Government violates constitution and fundamental rights by transferring pension gratuity payments to banks


The government has violated the constitution and infringed the fundamental rights of the public sector employees by handing over its liability of paying gratuity to pensioners to state-owned commercial banks, a 4-member expert panel alleged at a public discussion in Colombo this week.

By Pension Circular No. 04/2014, the Government has introduced a very unfair system of backing out of responsibility by devising a method of paying pension gratuities of public servants through the banks, JVP Trade Union leader and Provincial Councillor asantha Samarasinghe told a gathering of pensioners, state officials trade unionists and journalists at the ‘Sambhashana’ panel discussion organised by Transparency International Sri Lanka (TISL) at the auditorium of the Organization of Professional Associations (OPA).
The theme of the discussion was ‘Pension – What Next?’

File picture of pensioners outside the department.

Mr. Samarasinghe noted that minutes on pensions was legalized by Ordinance No. 02 of 1947 effecting the civil pension scheme to be operative with effect from 1901 and the pension gratuity system was introduced in 1942 under the minutes of pension in accordance with Pension act of 1943, he said adding that changing the system by issuing a circular without amending the regulations in the Act was against the Constitution.

This matter will be raised in parliament by JVP leader and MP Anura Kumara Dissanayake soon, he revealed.

The earlier practice was to grant this gratuity amounting to two years’ salary to pensioners at the time of their retirement by the Pensions Department and recover it by deducting 10 per cent as an installment of the pension payment in 10 years.Even then the amount recovered was only 60 per cent of the gratuity granted and the balance 40 per cent had been written off as a gift to public servants honouring their long tern public services, he said.

But, the newly introduced system of recovering the full amount of the gratuity in 18 years through the banks amounts to an injustice caused to the public sector employee, he alleged.

Planning of the new scheme has put on hold the payment of gratuity to around 14,000 pensioners for the past period of around one year. More than Rs. 10 billion is due to be paid to these pensioners.

But the government is deducting 10 per cent of their pension payment without paying them the gratuity and this is a violation of their fundamental rights, he claimed.

Mr. Samarasinghe noted that his trade union will take the lead in mobilizing masses and representatives of all trade unions in the country to correct this injustice caused to public sector employees as most of these employees are waiting to get a lump sum after their retirement to buy a land to build a house, to spend it for their daughter or son’s wedding or to start a small business.

Retired Sri Lanka Administrative Officer S. Ranugge, now Executive Director TISL, noted that it was surprising to see the silence stance of the public sector employees, trade unions and civil organisations at a time of a serious threat to pension benefits.

The whole society has been anesthetized in the face of many injustices caused to people, he said, adding that public sector employees are behaving like deaf and dumb as if nothing has happened to their pension gratuity.

The need of the present time is to unite all forces to persuade the government to restore pension rights of public servants, he said noting that their salary and pension anomalies have also not been settled as yet, although many promises have been given by the present administration during the past seven years.

“If the Treasury is broke, then what they should do is to borrow money from state banks and continue the pension gratuity scheme through the Pensions Department making necessary financial allocations from the budget without transferring the burden of gratuity loans to the banks,” he said.

He noted that he is making this proposal to the government as a remedy to overcome the financial crisis if there is any such issue.
Joseph Stalin, Secretary Ceylon Teachers’ Union pointed out that the government is trying to rob the pension gratuity money of public sector employees as well as the EPF money of private sector workers.

“If one obtains a gratuity from the Pensions Department, one should pay back only 60 per cent on a monthly basis for 10 years. But, when it comes to banks, the pensioner has to pay the total amount in 18 months,” he revealed.

On the other hand, pensioners will have to agree to all regulations of banks when obtaining a loan instead of their pension gratuity, he pointed out

“At the beginning, banks will say there is no guarantor, but what if they do, in another few years. No one will be willing to be a guarantor for a 60-year old,” he said,

Banks will also levy an interest as it will not lend money to meet government obligations without charging it for such services, which payment, probably will be in the form of an overdraft, for which interest will be charged against the state by the banks, he added.
This interest will also be recovered from pensioners as the Treasury will not reimburse the money in the long run, he predicted.
Gratuity payment has been delayed since 2006 as the number of pensioners is increasing. As a result they have to wait for six to 12 months to obtain gratuity – from the retirement date. As a result, the number of pensioners who have applied for gratuity has increased to around 14,000, he disclosed.

Citing an example, he noted that the government’s property loan granted to public servants only once throughout their careers equal to five years’ salary and at an interest of around 4 per cent in order to buy a house or a piece of land has been transferred to banks and now the receiver of the loan has become helpless, burdened by many conditions imposed by the banks in releasing those loans. The scheme has now been discontinued as the Treasury has failed to reimburse the money to banks.

Mr. Stalin asserted that the same situation will arise when obtaining pension gratuity loans from banks.

He pointed out that although the government states that the pensioner can either obtain gratuity through the Pension Department, or from one of the state banks, the department will not be able to pay the gratuity payment as the Treasury in a recent Circular No 04/2014/1 has already indicated that it will not reimburse money for such payments.

Economic expert and Member of Parliament Dr. Harsha de Silva suggested a contributory pension scheme for the country as the aging population is rising rapidly. He was highly critical of the Central Bank’s management of the EPF and investments in the stock market stating that it has purchased shares in some firms like Grain Elevators when its share price was up in a pumping-and-dumping scam. Under these circumstances it is essential to appoint a management committee for the EPF with at least three members representing employees.

He revealed that the Auditor General’s report on EPF 2011/2012 is yet to be presented in parliament although it has already been finalised. Now the government is saying that it should be presented at the cabinet meeting for approval and the matter is stagnating, he said adding that the EPF, the largest employees provident fund in South Asia, should have a strong internal audit mechanism and proper accounting procedure to safeguard it for future generations.

Annually, about 20,000 persons retire from the public service. The move to pay pension gratuity through state banks by the Government comes as the payment of pensions was adding to the Government’s costly expenses over the years. At present, the Government was paying out more than Rs. 140 billion a year with the number of pensioners increasing to 535,000.

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