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The
Employees’ Provident Fund (EPF) is by far the largest
such fund in Sri Lanka. It was established in1958, around
the same time that similar provident funds were established
in Singapore and Malaysia, then still under British colonial
rule. In retrospect, given the relatively advanced state
of welfare policy in Sri Lanka at that time, the motivations
and rationale for establishing the EPF in Sri Lanka were
quite similar to those in the more urbanized and economically
developed Singapore and Malaysia. Policy makers in all three
countries wished under ideal circumstances to adopt the
state pension system as existing in what was then the British
model, but practical and economic realities prevented such
a system being realized. In Singapore and Malaysia, the
Central Provident Funds (their equivalent of the EPF) were
designed by British civil servants sent from London as second-best
options to substitute for the perceived unfeasible UK pension
model. In the case of Sri Lanka, the EPF was largely chosen
and adopted as a model by Sri Lankan civil servants and
political leaders, albeit at a time when they were perhaps
more closely integrated than now to policy debates in the
English-speaking world. The major difficulties preventing
the adoption of a universal pension system at that time
would have included the large proportion of the work-force
who were in subsistence agriculture and non-formal employment,
and the large proportion of the population who were not
of adult age or participating in the work-force. In addition,
the practical and technical difficulties of designing and
managing a national pension system, given the then existing
capabilities of the Sri Lankan state would have influenced
policy makers, in addition to the relatively low rates of
economic growth that Sri Lankan policy-makers had experienced
since the global recession of the early 1930s induced by
US trade isolationism.
Since 1958, the EPF has operated relatively smoothly under
Central Bank supervision. It now controls the largest stock
of savings in the country, and plays a major role in public
policy, not only as a potential source of retirement income
for its beneficiaries, but also as the major financier of
the government structural fiscal deficit.
In recent years, both the actual and perceived shortcomings
of the EPF system have attracted much debate. However, many
of the most frequently alleged shortcomings and deficiencies
are misplaced, and some of the most substantial deficiencies
have been overlooked. Nevertheless, the relative success
of the EPF can and should be built on to further improve
its benefits for its current beneficiaries and to extend
those to a larger cross-section of the workforce.
Table of Contents:
- Executive Summary
- Introduction
- Establishment and Organization of the Employees’
Provident Fund in Sri Lanka
- Review of Investment Performance and Returns
- Assessment of Ability of Employees’ Provident
Fund to Provide Social Security to its
- Target Population
- Possible Reform Strategy for the EPF
- Bibliography
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