AN ASSESSMENT OF NATIONAL PROVIDENT FUNDS IN SRI LANKA

Abstract

Recent demographic trends in the world are appealing a much attention towards the adequate and sustainable social security systems. An efficient and effective social protection system will support social stability and social justice as well as economic development.  In the Sri Lankan context too the issue of aging has gradually become a challenge mainly due to the falling of total fertility rate and rising longevity. The study is an assessment of main National Provident Funds (NPFs) in Sri Lanka; i.e. Employees‘ Provident Fund (EPF) and Employees‘ Trust Fund (ETF). For the purpose of evaluation, it has been used several major criteria for effective social security system such as investment performance of the funds, minimizing administrative cost, the governance of the funds and effective implementation of other core functions (collection of contributions, timely refunds, record keeping mechanism, communication strategy). The evaluation of the current NPFs would allow to recognize reforming avenues as expanding the coverage of the member base, consolidation of EPF and ETF, investment diversification, removal of tax on investment income, replacing pension benefits instead of lump sum benefits, increasing minimum retirement age and establishing social security fund regulator. The study is concluded by emphasizing the importance of sustaining a high economic growth to achieve both the economic and social security to the citizens of Sri Lanka.

Key Words: Social Security, National Provident Funds, Employees‘ Provident Fund, Employees‘ Trust Fund

For full paper: fmscresearch@sjp.ac.lk