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Wed, 23 July 2014 08:12:11
Sri Lanka EPF pension fund may allow early withdrawal
10 Mar, 2009 06:50:41
By Ishara M Gamage
Mar 09, 2009 (LBO) – Sri Lanka's Employee's Provident Fund (EPF) which forcibly takes a part of the salary of a private sector worker for 'management' by the state may allow partial withdrawals of balances if new proposals become law, officials said.
Up to now desperate private workers hit by high inflation created in the country by the central bank and the low comparative yield of the EPF has resorted to using a loophole for housing loans to make de facto withdrawals from their pension fund.

One of the changes proposed under a change to the governing law of the fund is to allow worker to withdraw up to 30 percent of their balances after a membership of 10 years.

The fund is a forced savings scheme which is a useful bulwark for people's old age, but its managers had come under fire for acting in favour of the state, rather than discharging the fiduciary responsibility owed to the funds beneficiaries.

EPF superintended D Wasantha says about 50 percent of housing loans granted by banks using fund balances as collateral are in default.

Mortgage borrowers default on installments expecting the banks to foreclose on their EPF balances, in a de facto early withdrawal. Fund holders then have to pay penal interest rates and their credit records are also besmirched forever.

Offcials hope the early withdrawal facility will reduce the incentive to borrow and default against fund balances.

Officials say provisional data shows that in 2008, the outstanding balance of the fund has grown 16.5 percent to 653 billion rupees from 560.0 billion rupees which is about 13 percent of gross domestic product (GDP).

The fund has earned about 70 billion rupees as income this year.

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READER COMMENT(S)
5. amal Sep 26
I am sad to read Bhumi's comment on the word "forcibly' as it IS a forced act by the government. Saving for the time of difficulty is necessary, but forcing us to save when we cannot even have a day to day decent living is a crime.

I am in dire need of monet for various reasons. I cannot afford to pay that interest to the bank after a housing loan. Why should I suffer when I know I have the money in the EPF savings, but cannot take it ? it IS a forcible act.

4. Jade Aug 23
I have not been working for over 14 years due to ill health and don't intend to work for a local employer again. I am 48 years old.

Why wont the government have a scheme where those who have not been employed for over 10 years be permitted to withdraw their epf funds. We need the money to live before we can think of retirement.

3. Ratnayake Mar 10
Choice of saving should be given to private workers. Life has become increasingly difficult for us private sector workers.

I agree with the use of the term "forcible" saving scheme for EPF. I need my money now than 25 years later. I have to live today to think of tomorrow.

2. private worker Mar 10
The truth hurts obviously. By using nice cuddly words like 'compulsory' is how rulers have pushed these draconian measures on the private sector workers and scammed them for so long. Keep up the good work, expose them.
1. Bhumi Mar 10
The term used for EPF contributions as "forcible" by the author of the article is pathetic. In many countries including Sri Lanka there is mandatory contribution of a certain percentage of salary which is saved in a fund for withdrawal after retirement.

If that is termed as "forcible" anything that is governed under law and order or any other regulation is also forcible. This is nothing but irresponsible reporting.