Pension Problem

Dec 28, 2007 (LBO) – The International Monetary Fund has criticised delays in reforming Sri Lankan state sector pension schemes and urged government to regulate private pension funds. It also urged the government to allow large pension funds to expand their private securities portfolio in order to develop the securities market, and make them more independent to generate adequate returns for members.

IMF said the “pension reform process has stalled” in a recent assessment of the island’s financial system stability.

Reverse Gear

The current administration abandoned a scheme to move all new state workers into a contributory pension fund, despite a law being passed to establish a fund. At the moment state workers get an unfunded tax free pension funded by tax-payers.

State workers also get tax free salaries.

The IMF report was critical that the government had rolled back planned reforms of state sector pensions and of delays in getting public servants to contribute to their retirement schemes.

“..there has been no progress in pension reform, where initiatives to move the public service pension scheme to a funded basis have been reversed,” the report