Top legal expert urges govt. to consult private sector on proposed EPF pension scheme

By Nishel Fernando

A leading corporate legal expert has urged the government to engage in meaningful consultation with the private sector, including the Ceylon Chamber of Commerce, before proceeding with the proposed conversion of the Employees’ Provident Fund (EPF) into a pension scheme. 

The call for stakeholder engagement follows a recent announcement by Labour Deputy Minister Mahinda Jayasinghe, who revealed that the government is considering formulating a mechanism to pay the EPF benefits as a monthly pension, rather than the traditional lump-sum payment upon retirement.

Sudath Perera Associates Partner and Head of Corporate and Commercial Law Dushyantha Perera cautioned that if the government is serious about implementing such changes, it must consult the directly affected stakeholders. He drew a sharp distinction between the state and private sector retirement benefits, noting that unlike the government sector pensions, the EPF is partially funded by the employees themselves. 

These contributors forego a portion of their monthly earnings, with the specific expectation of accessing the accumulated capital upon retirement or in limited circumstances such as marriage, migration or permanent incapacity.

Perera highlighted that the current lump-sum system is integral to the personal financial planning of the private sector employees. He noted that many retirees rely on these funds to invest in fixed deposits, the Colombo Stock Exchange, money markets and real estate. 

He argued that the employees have a legitimate expectation to access and utilise these funds as they see fit, often viewing themselves and their chosen financial advisors as better custodians of the capital than the state, based on historical precedent.

Invoking the colloquial saying, ‘if it ain’t broke, don’t fix it’, Perera suggested that the policymakers should instead focus on structural efficiency. He proposed that a more pragmatic approach would be to merge the EPF and Employees’ Trust Fund (ETF) into a single provident fund, under a unified legal and administrative framework, questioning the rationale behind maintaining two separate funds to achieve the same objective.