Experts call for national pension policy framework
09 Oct 2015 - {{hitsCtrl.values.hits}}
Say nearly 82% of the elderly don’t receive pension benefits
By Chandeepa Wettasinghe
The Sri Lankan government must work towards creating a national pension policy framework to ensure financial security for the rapidly ageing population of the country, experts told a National Pensioners Day Symposium organized by the Department of Pensions yesterday.
“Pensioners will live longer and draw more pensions. Though the population is not doubling, the old aged population is doubling,” University of Colombo Demography Professor Indralal de Silva said. He noted that those above the age of 60 who now stand at 12.2 percent of the population will increase to 24.8 percent in 2040.
“Once they retire at 60, they have 21.6 years more of life expectancy. In all other South Asian countries, the retirement age is higher than the healthy life expectancy. We should increase the retirement age to 62, observe the results, and then increase it to 65,” Prof. de Silva added.
The scenario is likely to further aggravate with the advances in medical science.
“If some health innovation comes and the life expectancy increases, we will have to pay even more pension,” AIA Sri Lanka CEO Shah Rouf said.
Even in Singapore, where apex research body Mercer placed as having the 10th best pension scheme in the world, against a healthy life expectancy of 80, the retirement age is 67, which the Singaporean government is now increasing to 70, Prof. de Silva said.
Massive gaps exist in the current Sri Lankan framework. Even though there are 24 pension schemes in the country, there are no common policy frameworks to govern them and cover a larger portion of the population.
“Nearly 82 percent of the elderly don’t receive pension benefits,” Prof. de Silva said, and added that most of the pensioners are from the public sector. The Department of Pensions spends Rs.14 billion a month on public sector pensions.
Prof. de Silva warned that ageing societies save less, which leads to massive macroeconomic pressures.
Sri Lanka has been facing acute budget deficits and BOP crises as a result of relying on foreign investments instead of domestic savings.
Verite Research Executive Director Dr. Nishan de Mel pointed out that the government is accounting the Employees’ Provident Fund (EPF) in the budget to create a more favourable budget deficit figure.
JB Securities (Pvt) Ltd CEO Murtaza Jafferjee said that the governance of all pension plans should be free of government or employer control and, instead of allocating funds for the government pensions at each budget, a superannuation fund must be created.
All recent governments have been promising pension plans for many industries, with the current regime promising one for the foreign workers.
“Every pension spending promise has to be costed. Pensioners are voters. As the number of pensioners increase, the government will be forced to increase pensions in an ad-hoc manner,” Dr. de Mel said.
Institute of Policy Studies Research Fellow Dr. Nisha Arunatilake said that governments don’t know how to plan for pensions.
“The universal cover for pensions is 20 percent of GDP. In Sri Lanka its 1.4 percent,” she added.
Jafferjee stressed that a regulatory body must be established to examine different pension plans existing in the world and create a best fitting plan for Sri Lanka.
“We need an independent regulator, and the people employed in it need to be technically competent and multi-disciplined,” he said.
The panel discussed implementing many pension options based on different pillars in the future.
“I want to see a sustainable framework for the country, and everyone needs to be in it. We can bring all the pensions in one framework, the systems are in countries around us,” Pensions Department Director General Sunil Hettiarachchi said.
However, AIA Sri Lanka CEO Shah Rouf said that until the government comes up with a solution, the citizens will have to take care of their own finances.
“Human nature means people want to spend instead of saving. All pension schemes must evolve, and Sri Lanka must start now, he said.
