Financial Times

Extending age of public sector retirement, welcome development
By A. Sarath de Silva Former General Manager – Bank of Ceylon Presently the Chairman of Lankaputhra Development Bank

With the rapid expansion of the government developmental activities, the envisage infrastructure development arising from the “Mahinda Chinthana” initiatives and the simultaneous shortage of experienced personnel, particularly in the financial, administrative, technical and scientific fields, governments can no longer afford to lose officers, who are at the time of their retirement are in full possession of their physical and mental faculties. Furthermore, it would not be in the national interest to allow the wealth of mature experience of these officers to go to waste.

There is a view that as the tenure of service, and their age increases, so will their effectiveness, objectivity, ability, and enthusiasm for the job decline. They will lose their vigour and become less capable of or interested in keeping abreast of current trends and developments. Their perspectives will become more entrenched and they will become less responsive to new and innovative ideas.

There is, however, an alternative view and that is that a reasonably long period of service is essential to confer an employee a deeper understanding of whatever the entities’ business which will, in turn, result in their contribution being more effective. The depth of knowledge and wisdom acquired through experience and ages are, these proponents say, indispensable qualities to the entity to receive the optimum benefit. Both perspectives have merit but while the first no doubt applies to some employees, the second applies equally to others. In other words, individual capacity is can vary considerably.

The term “retirement” means different things to different people. The Oxford English dictionary defines “retirement” as the period of one’s life after retiring from work or seclusion. The Barron’s dictionary of Business Terms defines “retirement” leaving active employment permanently, for the remaining years of life, with income being provided through Social security, pensions, and savings.

In the Sri Lankan perspective the word retirement denotes a change to sedentary lifestyle with no useful economic contribution which notion is symbolic of colonial rule. The retirement in the writer’s view is nothing but “a termination of a service agreement” and a dawn of another chapter in one’s working life.
As in most countries, the population of Sri Lankan is ageing. The proportion of those above 65 years of age which was 3.6% until 1963, increased to 4.2% in 1971 and 5.4% in 1981.

The corresponding age structure in the census – 2001 indicates that the proportion has further increased to around 7% this trend will create a serious resource consideration to the government budget in allocating funds necessary for providing social security. Maintaining the current retirement age will also make certain pension/superannuation schemes quite expensive and the accumulations under the various provident funds, quite inadequate. An important dimension at present is the average entry age to Management Grades in the state sector which ranges from 28 to 30 years contrary to the past experience where it was ranging from 22 to 26 years of age.

According to a study conducted in Sri Lanka by the World Bank in 2000, the life expectancy is around 72 which is now 74.97 which implies passitivity ratio around 57% (i.e. years in retirement / years in employment). Hence the World Bank report sounded the government to consider gradually extending the mandatory retirement age to 65 years of age. The World Bank is also of the view that an increase in the retirement age would likely increase the productivity and the utility of those affected at the same time as reducing the dependency ratio. It further enumerates that many countries have chosen to follow this path.
It is a cause for concern that the standard of recruitment to the Sri Lanka Administrative Service, state banks and certain statutory bodies has been systematically watered-down and consequently the quality of the recruits has deteriorated.

A combination and inter-play of several factors such as erratic recruitment policy, frequent changes and delays in regular recruitment has resulted in severe imbalances in the age structure in the public as well as in certain key vital institutions of the state sector, thus creating a severe vacuum in the continuity of the operations where a high degree of maturity and experience is demanded.
An important aspect that needs to be considered is the financial implications of any increase in the age of retirement.

This is rather difficult to assess, because the advantages that accrue to the government by the extension of the services, of experienced officers can hardly be evaluated in monetary terms. It is popularly believed that the retirement of an officer involves a saving but this appears to be a fallacy. The pension so payable to him/her on retirement is, as far as the government is concerned, non-productive expenditure without any return. Also, there would hardly be any saving in salary because the vacancy caused by the retirement would be filled and the salary of the successor would hardly be appreciably lower than that of the officer retired.

Furthermore, it is evident that some of the top public servants who retired are absorbed by the private sector with a higher remuneration package at a time when the public service needs to be strengthened.
Infact, the 1961 Salaries and Cadre Commission headed by the late Mr. Wilmot A Perera recommended that “on reaching that age, an officer may be allowed an extension of 2 years solely at the discretion of the government to take him/her up to the age of 62 at which age retirement will be compulsory”.
It is also relevant to point out that in the case of Supreme Court judges and academic staff of universities, the age of retirement is 65 years. In the case of Appeal Court Judges, the age of retirement is 63 years by statutory provisions.

At present, the age of retirement in the public sector is always a function of government policy and sometimes also of employment type. The trade unions in the public sector who would naturally respond negatively to the differed age of retirement should realize that such a measure would strengthen the institutions and the systems rather than benefiting the narrow interest of a few segments of the membership where neutrality in such issues may be beneficial. Controversial topics of this type should be embarked upon only at such time a substantive understanding of the economic and social impact has been determined and a well-informed public debate is possible within a context of a superannuation benefit strategy, this issue would probably fall into the medium term.

As a short term strategy, it is desirable and also feasible that the government should consider on an urgent basis to differ the age of retirement of very senior officers who are holding high positions both in the public and statutory boards particularly in the areas where reforms and development activities are involved on a strictly selective basis as a declared policy measure subject to the proviso that their total number of years in service by the age of 62 years does not exceed 40 years and further subject to a rigorous medical examination which process prevails when selecting persons to high posts in the government by the parliamentary committee.

It is a forthright decision and a signal in the correct direction. President Mahinda Rajapaksa has issued an Extraordinary Gazette amending the rules of the Public and Judicial Officers (Retirement) Ordinance to state that; “the President may if he considers it expedient extend the age of compulsory retirement of any Public Officer appointed by the President.” Since the aforementioned direction covers only a small segment of the public service, it is appropriate at this juncture to extend this gesture to a wider range of state sector officials as a declared policy measure by the Cabinet.

(The views expressed in this article are personal to the writer).

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Extending age of public sector retirement, welcome development


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