Trade unions stirred by proposed EPF reforms
View(s):Four weeks after a trade union raised concerns over proposed reforms in the Employees Provident Fund (EPF), another group of unions this week urged the Government to conduct a referendum among workers on the new proposal.
“The undersigned unions strongly urge the Government to go before the EPF members to verify their views on the ADB proposals to move the EPF to the private sector. We wish to point out that the mechanism available with the Department of Labour to conduct (a) workplace level referendum could be made use of to ascertain the wish of the individual members of the fund,” the unions said in a joint statement.
It was signed by the Ceylon Federation of Labour, the Ceylon Mercantile Union, the Ceylon Bank Employees Union and the Ceylon Estate Staff Union.
In early July, a draft White paper on the reform of EPF Legal and Operational Frameworks by US-based Aries Group Ltd under an ADB project (part of a US$300 million loan from the ADB) was discussed between the consultants and members of the National Labour Advisory Council (NLAC) under the aegis of the Labour Ministry. The aim of the plan is to allow the fund to invest in the stock market among other high-yielding securities.
However unions are opposed to the move with some saying the worker-members should be consulted or represented in the decision-making management of the fund.
In their August 8 statement, the four unions allege that governments since 2002 have sought to tamper with the EPF under various pretexts. The statement referred to such instances in 2002 and 2011 and drew attention to a recent capital markets strategy to increase participation of pension funds in the stock market.
“The present Government in its bid to revive its efforts of 2002 has now sought the assistance of the ADB to help advance the development of the capital market,” the unions said, cautioning the authorities not to lose sight of the original objectives of the EPF which is to provide tax free savings benefit for the individual worker at retirement.
“Developing the capital market or coming to its rescue is nowhere near its objectives. The ADB white paper envisages reforming the EPF Act to achieve the objective of maximizing retirement benefits for its members through the establishment of multiple investment funds giving opportunities for members to select investment funds based on their own risk/reward profile preference.
“Due to the low level of financial literacy of the members and the immature state of our capital market such an exercise is bound to turn out as a recipe for disaster.
On the ADB’s own admission the private sector bond market is still in its nascent stage. The EPF’s Rs.1.7 trillion is being targeted to give the much needed fillip to the sagging capital market. The proposed diversification of investment into offshore instruments, if one is to go by our experience with Greek bonds, is bound to be catastrophic,” the statement added.
While the ADB’s EPF reform proposal is aimed at maximising the old age pension of only members of the EPF, the unions said it was their view that what the authorities should strive for is a national old age pension scheme with universal application outside the scope of the EPF so that all those who reach retirement age will stand to benefit.
The statement said that the old age pension system is of current importance as Sri Lanka is one of the fastest ageing societies in the world. “It is our view that a monthly pension for the elderly should come through a scheme financed by public funds and treated as a fundamental right to ensure dignified living in old age,” it said.