A leading researcher called on the government to establish an independent regulatory body to oversee the country’s pension system.

“The governance of pension plans should be free of government and any employer control. In most systems you will have an independent regulator, but it will also be managed independently,” JB Securities (Pvt.) Ltd CEO Murtaza Jafferjee said.

Regulatory bodies are present in Sri Lanka for many sectors, including insurance, the capital market, finance, utilities and telecommunications. However, all fall under government control.

He said that the employees in the proposed regulatory body need to be technically competent and multi-skilled in order to find an ideal retirement system for Sri Lanka. Jafferjee said that Sri Lanka could follow different regulations, such as a minimally funded pension scheme for all citizens, a contributory system such as the Employees’ Provident Fund (EPF) for the entire labour market, or a personally managed system, which is common in Western countries.

“What is the ideal retirement system? There is no such thing. This is basically a system that each country has to mete out and come up with a suitable system for the local context,” he added.

He also said that there is currently no choice for the citizens in Sri Lanka, since the government is in charge of all pension and retirement schemes.
However, he said that politicians might not be willing to approve such changes.

“There is a lack of political will to make the necessary reforms, because invariably one or more people will lose out during the changes, and the politicians know they want to be elected back,” he said.

The EPF, which accounts for a minority, is not included as it offers a one-time retirement payment which does not afford total financial security until death. Jafferjee said that creating independent, professionally managed pension funds will ensure that there are enough domestic savings.

The lack of such savings has forced the government to apply for foreign loans, which is one of the key reasons for Sri Lanka’s budget deficit. (CW)