The Employees’ Provident Fund (EPF), Sri Lanka’s main State-owned pension fund reached Rs 900 billion last year and is set to cross the Rs 1 trillion (Rs 1,000 billion) mark in 2011, according to the Central Bank (CB).
It said in a statement on Saturday that, the EPF has been able to provide an interest rate of 12.5% on the year-end member balances, adding that this is a very attractive rate under the current low interest rate environment.
Member contributions rose by 12.5 % and the number of active members of the Fund increased by 9.5 %, ‘reflecting the increased new employment opportunities within the economy’.
The EPF received Rs 54.8 billion as member contributions, and paid-out Rs 34.9 billion as refunds to its members and their legal heirs in 2010.
The gross income of the Fund was Rs 121.3 billion, which was 10.6% higher compared with that of the preceding year.
It said the Fund invested more than 94% of its funds in Government Securities (Bonds, Treasury Bills) as a result of which, interest income and amortization gains were the main sources of income to the Fund. During 2010, EPF earned Rs. 118 billion from its investments in Government Securities.
In that year, the EPF also invested Rs. 32 billion in the Equity Market (Stocks, etc) recording substantial gains under the sustainable peaceful conditions, better corporate earnings, and more favourable economic prospects in the country.
Opposition politicians have been critical of EPF investments in the stock markets.
The CB said equity (stocks) investments, which represented 1.3% of the total EPF portfolio at end 2009, increased to 5% by end 2010.
“The EPF’s key focus was on fundamentally sound stocks in the banking, finance and insurance, hotel, travel and diversified sectors. With the revival of the Sri Lankan economy, these sectors are expected to flourish in the medium to long term,” the CB said.
The EPF was able to generate just over Rs. 1.5 billion in realized gains, and a further Rs 16.2 billion in unrealized gains from its Equity portfolio. Since the major portion of the EPF’s Equity investments are held in the long term portfolio, further substantial gains are also expected to be realized in the future, the statement added.