Sri Lanka will see the emergence of a plethora of pension funds next year with the entry of three new funds announced in the budget which would be managed by the Central Bank (CB), targeting the 8 million-strong workforce.
CB Governor Ajith Nivard Cabraal told the Business Times that mobile service providers would be called shortly for a meeting to discuss ways in which the mobile phone could be used in the new Citzens’ Pension and Insurance Fund (CPIF) to make it easier for contributions.
“Most of the beneficiaries of this fund would be the self-employed – taxi drivers, vegetable vendors, small entrepreneurs who use mobile phones. We want to make it as simplified as possible,” he said. This fund is targetting the six million workers outside the EPF (which covers 2.1 to 2.2 million workers).
The CB wants to make it as user-friendly as possible with members being asked to submit their names, ID number and beneficiary/heir. “We have been thinking of a proper pension fund for the informal sector for a long time,” he said. The rationale for the other fund in which EFP members will contribute (Employees Pension Fund) is because often members use up the money quickly (on retirement) and this source of income dries up. “Now there is another fund to fall back on in the form of a monthly pension,” Mr Cabraal said. Economists said another benefit from this would be that senior citizens who plough their life savings into shaky unlicensed financial institutions to get a better return for their daily sustenance could now rely on a monthly pension, once they retire, under the new proposal.“We may use the same EPF form for employers to send the money to simply the process for all,” the Central Bank chief said.
Asked why the government was launching another fund when it would have been easier to transform the EPF into a pension fund, Mr Cabraal said super annuation funds and pension funds work differently. “In a pension fund you need to get a return every month,” he said, adding that the scheme is voluntary. “Anyone can put in even Rs 100 and start contributing thereafter – that’s not a big amount. Take the millions who sent SMS for mega star and other reality shows .. they would have spent more.”
He said legislation would have to be prepared for these pension funds but the CB was going ahead and preparing framework for these funds.
While there are no plans to merge and bring together the plethora of state-managed funds starting from the small ones benefiting farmers and fishermen to the big ones like EPF and the new ones benefiting migrant workers, the Central Bank chief didn’t rule out discussions on similar lines – if the need arose.
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