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 r