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By Ravi Ladduwahetty

Private Pension Funds will be a reality by end 2003 and a new contributory scheme for public servants will also come into effect by that time.

The proposed plans are under the Government's ambitious Pension Reforms Scheme which will aim to alleviate the overgrowing Government liability in this vital welfare measure.

The reason for the setting up of Private Sector Pension Funds is seen as a modern development where prospective applicants will have the discretion of investing in a Fund of their choice and this will provide an opportunity for them to invest in the Fund which will give them the maximum yield, Secretary to the Pension Reforms Task Force Dr. A. Bandara told the Daily News yesterday.

The Reforms will also aim at providing a new contributory scheme for new entrants to the public service as the Government will not be able to sustain new entrants any further. However, existing pensioners will continue to draw their pensions uninterruptedly.

The total cost of the pensions was Rs. 26.3 billion in 2001 and Rs. 31.4 billion in 2002, Dr. Bandara said. A further cause for pension reforms comes in the wake of an ageing population where the median age of Sri Lanka was 25 years in 2002 while the median age by the year 2025 is expected to be 50 years.

This means that 50 percent of the people now are below 25 years while the other 50 percent are above 25 years. By the year 2025, fifty percent of the population will be above 50 years while the other half will be below twenty-five, he said.

The Task Force on the Super Annuation Reforms chaired by the Central Bank of Sri Lanka comprises Senior Deputy Governor W.A. Wijewardena, the CBSL's Senior Economist of the Economic Research Department Dr. A Bandara (Secretary), CBSL's Superintendent of EPF N.J. Perera, CBSL's Senior Examiner of Bank Supervision B.S. Ratnayake, Employees Provident Fund Commissioner S. Ranaweera Director of Pensions Victor Samaraweera and private sector personnel comprising CTC Eagle Insurance Managing Director/CEO Chandra Jayaratne, Fitch Ratings Managing Director/ CEO Ravi Abeysuriya and Stock Brokers Association Chairman and HNB Securities General Manager /CEO Deva Ellepola

The Pension Reforms Scheme, which is a part of the Government's Financial Sector Reforms Program hopes to extricate the Government's liability in this annually staggering overhead will also attempt to amalgamate the Employees Trust Fund and the Employees Provident Fund.

There will be Fund Managers who will monitor the investments in this direction as there are guidelines in the limitations in investments in the equities market, Dr. Bandara said.

The Task Force has been mandated to set up an office of Pension Reforms and hire a Chief Executive Officer and two consultants and advertisements will be placed in the international media such as the Wall Street Journal and the Economist to obtain these resource personnel at the highest level, though preference will be given to an expatriate Sri Lankan who will have a proven track record in Actuarial Science. This is in consonance with the World Bank recommendations, which is the principal donor concern which is advocating the reforms.

The Terms of Reference of the CEO will be to draft a Pensions Reforms Strategy Paper and also to draft the requisite legislation. He will also be responsible for the implementation of the pension reforms as well.

Pension Funds amounting to a staggering Rs. 863 billion will be available for private sector investments which comprises Rs. 580 billion from the Private Sector Pension Scheme (PSPS), Rs. 280 billion from the Employees Provident Fund and Rs. 3 billion from the Employers Trust Fund.

The Ministry of Labour and Employment will be administering these Pension Funds while the regulation which also covers the investments will be made by the Finance Ministry. Investors will enjoy higher returns as a result of the proposed reforms.

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Copyright 2001 The Associated Newspapers of Ceylon Ltd.
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