Sri Lanka retirement fund gives 10-pct return for 2009

Mar 25, 2010 (LBO) – Sri Lanka’s Employees’ Provident Fund gave members a real rate of interest of 10.01 percent in 2009 with annual average inflation falling to 3.4 per cent, the Central Bank said. It said in a statement the fund, which it manages, has declared the highest-ever rate of interest of 13.75 per cent to its member balances in 2009, an increase of 55 basis points compared to that of 13.20 percent in the preceding year.

Sri Lanka’s 2009 inflation, according to the 12-month moving average, was 3.4 percent, compared with 22.6 percent in 2008.

Yields on government Treasuries, in which the bulk of EPF money is invested, are now in the range of 8.45-9.47 percent, and edging up, although down from near 20 percent levels in late 2008.

The EPF has for years been giving its members annual negative returns as interest paid was below annual inflation.

Over the last fifteen year period the fund earned a positive real rate of 1.42 percent, the Central Bank said.

Sri Lanka has been known as a high inflation country but the Central Bank is projecting lower inflation in future with the end of the island’s 30-year ethnic war last year.

It is targeting 5 to 6 percent average inflation by end-2010.

“The Fund’s investment policy continued to be focused on long-term positive rate of real return to the members ensuring the safety of the fund while maintaining an adequate liquidity for refund payments and meeting the expenditure of the Fund,” the Central Bank said.

In 2009, the gross income of the fund increased by 37.9 percent to 109.6 billion from 79.5 billion in 2008.

The rate of return on average portfolio increased to 16 per cent in 2009 from 13.8 per cent in 2008.

As at end-2009, the total investment portfolio of the fund stood at 738.1 billion rupees, up 17.7 percent from end-2008.

Of this total, 97.1 percent was in government securities while 2.4 percent was placed on corporate debentures and equities.

The balance 0.5 percent was invested in high liquid assets such as reverse-repos on Government securities to maintain liquidity.

The Central Bank said in 2009, a sum of 90,709 million rupees was available for distribution as interest to the members of the fund.

By end-2009, the total number of member-accounts increased to 12.7 million from 12.5 million in 2008.

As at end-2009, the fund or the total liability to the members, stood at 752.2 billion rupees, an increase of 16.6 percent as at end-2008.

The total amount of refunds to the members and their legal heirs in 2009 was 31.9 billion rupees, increase of 23.2 percent from that of 25.9 billion in 2008.

Compared to the preceding year, the number of refund applications processed increased by 5.4 percent to 108,066 applications during 2009.

The net contributions (contributions less refunds of benefits) stood at 16.3 billion during the year compared with that of 20.0 billion in 2008.