Retirement benefits, skills and the ageing workforce

Sunil Karunanayake

During the past four decades the world has witnessed an increase in lifespan by a few years perhaps due to advances in quality of life prosperity and improved healthcare. It has also been noted that most people have utilized the extra years thus earned for leisure.

These have brought about a revolutionary change in the lifestyles and spending in most developed countries. In the recent years this trend has been observed in developing countries too through rapid economic development as seen in India and Malaysia. We in Sri Lanka too have observed declining poverty and improved lifestyles.

The state sector modeled on the British system enjoyed pension benefit and for this reason the state sector was attractive to most job seekers. The provident fund facilities were limited to a few in the private sector such as plantations, banks and multinational companies that operated their own provident funds while a majority belonged to mercantile services provident society that operated within the Ceylon Chamber of Commerce. The Employee's Provident Fund (EPF) a contributory scheme was set up in 1958 by the socialist government that came to power in 1956 following a major industrial dispute in a leading multinational.

This move benefitted many employees and in particular the non white collar category. Following the emergence of a liberal pro capitalist regime in 1977 that liberalized the economy and brought in a business friendly atmosphere two far- reaching legislations i.e.: Employers Trust Fund and the Gratuities Act that provided a solid retirement package were introduced.

Consequent to a proposal made in the 2011 budget in 2010, the government recently made an announcement that steps are being taken to introduce a pension scheme for private sector employees. This was welcomed by employer organizations and other key stakeholders as a far-reaching benefit. The draft Bill was presented in Parliament on April 8. However this is still being examined by the key stakeholders and no finality has been reached due to certain reservations. It is hoped that the issues will be resolved soon ushering a new era for the private sector employees.

Pension issues are common even in rich countries due to fund deficits and falling markets. During the 2008/9 global financial crisis pension funds suffered heavy losses and the retirees were the sad victims. This situation has now improved considerably. Many governments including the rich world are struggling as how to deal with the ageing population. Even in Sri Lanka this is a hot topic due to the declining interest rates and limitation of income options. Senior citizens have been recognized only by fewer institutions i.e. few banks and Osu Sala.

Developed countries are now in the process of extending the retirement age with the objective of saving on State costs on pensions. According to the latest information America is planning the retirement age to be extended to 67 and Britain 68.

Working longer enables employees to earn wages for a longer period and the government revenue enhances through taxation. With more in employment economic growth too could be faster. Sri Lanka's company legislation too specifies the maximum age limit for Directors at 70 with a proviso those over 70 could continue with shareholder's sanction at the AGM.

Time and again many researchers have highlighted the value of aged employees. Well known banker and former Central Bank Governor N. U. Jayawardena achieved most of his milestones in late age and continued to work till 92 when he passed away.

He also paved the way for high tech banking with the setting up of Sampath Bank. According to US based Kauffman Foundation Americans in the age group of 55 to 64 have launched more businesses than those aged 55 to 64 since 1996. It has also been found out that consciousness rises with ageing, older workers are more attentive on the job with fewer absenteeism.

Two American academics Peter Capelli and Bill Novella in their publication "Managing the older worker" quotes that not only does older worker wants to go on working and through their decades of formal and informal knowledge deliver considerable benefits to the employees.

Some leading companies have requested the old staff to document informal knowledge they have gathered during their careers. It is also learnt that older employee's interest in financial rewards is limited but they value flexibility.

Elderly care is not considered a major issue in Sri Lanka due to cultural patterns that provides for ageing parents to live with children, most also believe that moving to elder's homes is not socially acceptable.

However sustaining these traditions seems to be difficult with both spouses being employed and the higher cost of living. Another factor is the mass migration of the young people to developed countries.