Thu, 05 Aug 2021 Today's Paper

Restructuring the EPF is a must to protect the funds of the workers

12 November 2015 06:30 pm - 0     - {{hitsCtrl.values.hits}}

A A A


Workers of 14 estates belonging to Agalawatta Plantations protested demanding their ETF/EPF dues outside the plantation’s head office in Maradana on November 5, 2015                  Pic by Pradeep Pathirana



The Prime Minister last week in his policy statement said steps will be taken to secure the funds in the Employees’ Provident Fund (EPF) and Employees’ Trust Fund (ETF). He said both these funds will be amalgamated to create a new national pension plan and the combined worth of the new fund will be around Rs.1.7 trillion. 

He also said they will not leave room for politicians and officials to waste money of this new fund. Despite that assurance, the Opposition politicians and trade unionists have expressed their strong opposition to a government move to set up a common fund by merging the EPF and ETF under the cover of introducing a pension scheme for the private sector employees. 

We cannot blame them given the track of the EPF where the former Central Bank administration was accused of getting involved in pump and dump deals. There are many examples of such transactions that have still not been properly investigated by the current administration. For example, JVP North Central Provincial Council Member and Inter Company Employees’ Union Chairman Wasantha Samarasinghe told The Island that the workers would take to the streets if the Sirisena-Wickremesinghe government laid its hands on the EPF and ETF like the previous Rajapaksa government.

He accused the Rajapaksa government of having invested huge sums from the two funds in the stock market in an irresponsible manner. Ceylon Teachers’ Union General Secretary Joseph Stalin said the government had no right to dip into the EPF and ETF according to its whims and fancies as they belonged to the workers and the government was only its custodian.

Given this sentiment, it would be prudent for the government to discuss the proposed institutional mechanism and how the proposed institutional structure can protect the monies of the workers and give them better returns in the future.


Provident Fund
The EPF, which is under full state control, is the largest retirement fund of private sector workers. The EPF has invested about 92 percent of its funds in government securities, 6 percent in stocks and 2 percent in corporate debt and short-term government securities. 

Today, what often concerns contributors to the fund is the limited benefits the EPF offers them during their working life, when compared with some of the well-managed superannuation funds globally that fund skills development, healthcare and provide effective housing benefits. 

Take the CPF of Singapore - the whole scheme is tied to housing, health and a host of benefits for workers. It is also not out of place to point out that the NTUC (the only trade union recognized in Singapore) has the Prime Minister as Ex-officio President and that the type of tripartism practiced is unique and not much different to a communist form although the economic policy is strictly market driven.  

The CPF has never been accused of mismanagement and for investing in junk bonds and stocks. The concern for many workers is how safe their contribution would be by the time they retire and in addition, the real value of their balance that will be available to use as a retirement income. That is where the real problem lies which needs to be addressed in consultation with all the stakeholders. The Prime Minister is the best person to do this.


Need to restructure
What the unions must realize is that what the Prime Minister is attempting to do is a good thing; he is effectively taking the control of the fund away from the Central Bank to an independent body where all stakeholder representatives can sit together and decide how the funds should be managed based on defined policy guidelines. 

The members can also be given two options; either to continue with the current way of doing things under a credible body to expand the services of the EPF or to create a new mechanism to pay a lump sum at retirement and retain an amount to deliver a pension for life. Or even move beyond that to create a hybrid system consisting of both options.  

According to the EPF Act, an employee is required to contribute a minimum of 8 percent and the employer a minimum of 12 percent of the total salary of the employee monthly, to the EPF. During the course of employment the worker derives little benefit and the benefit is fully for the state in the short term. Given the significant changes in the workplace as a result of new and advanced technology, a vehicle for skills training would also help employees to remain employable during their working life and also help to grow our nation’s skills base. 

On the other hand, the ETF board, unlike the EPF, has private sector and trade union representatives on the board and the institution was set up to assist workers during their working life, unlike the EPF, which was set up to benefit an employee when they retire at 55 years or 60 years. 

Furthermore, it may be also prudent for the government to study its current and long-term funding options and the risks associated with managing the EPF in consultation with the private sector because any change that is proposed should not fundamentally alter the rights of workers over their current benefits (gratuity and EFT) or the long-term benefit of receiving a lump sum at 55 years or 60 years. The private sector could also benefit substantially through a form of an unemployment benefit scheme, which a new system can fund if properly merged. That would help companies to restructure and become more competitive and for the economy to improve its competitiveness. 

Therefore, in the final analysis, the government should be lauded for attempting to secure the retirement future of many low-income workers who do not have the privilege of hefty bonuses and long-term options. What they however need to do is to ensure that there is no room for bureaucrats and politicians to squander the funds of the workers like before, therefore the entire transition needs to be fronted by a credible and competent team appointed after consulting with all the key stakeholders i.e. the state, unions, employers and civil society. The Prime Minister for sure understands these issues and should therefore address them early to ensure he can successfully push through the reforms the EPF and ETF so badly needs.

(Dinesh Weerakkody was a Chairman of the Employees’ Trust Fund board)
See Kapruka's top selling online shopping categories such as Toys, Grocery, Flowers, Birthday Cakes, Fruits, Chocolates, Clothing and Electronics. Also see Kapruka's unique online services such as Money Remittence,News, Courier/Delivery, Food Delivery and over 700 top brands. Also get products from Amazon & Ebay via Kapruka Gloabal Shop into Sri Lanka.

  Comments - 0

See Kapruka's top selling online shopping categories such as Toys, Grocery, Flowers, Birthday Cakes, Fruits, Chocolates, Clothing and Electronics. Also see Kapruka's unique online services such as Money Remittence,News, Courier/Delivery, Food Delivery and over 700 top brands. Also get products from Amazon & Ebay via Kapruka Gloabal Shop into Sri Lanka.

 


Add comment

Comments will be edited (grammar, spelling and slang) and authorized at the discretion of Daily Mirror online. The website also has the right not to publish selected comments.

Reply To:

Name - Reply Comment




See Kapruka's top selling online shopping categories such as Toys, Grocery, Flowers, Birthday Cakes, Fruits, Chocolates, Clothing and Electronics. Also see Kapruka's unique online services such as Money Remittence,News, Courier/Delivery, Food Delivery and over 700 top brands. Also get products from Amazon & Ebay via Kapruka Gloabal Shop into Sri Lanka.

 


Rotary Club of Colombo installs it’s 93rd President at a Virtual Ceremony

Founded in 1929, making it the oldest and also the largest Rotary Club in Sri

Ugly sporting truths Sport scholarships thrive in culture of corruption

Sadly the cohort of perpetrators include egotistical leaders, coaches and eve

JR Jayewardene and the July 1983 Anti-Tamil Violence

July 24, 1983 was the day on which a destructive spree of anti-Tamil violence

“Medamulana Dynasty”: Four Sons and Three Grandsons of Don Alvin Rajapaksa

Basil Rohana Rajapaksa was sworn in as Finance minister in the Government of