Sri Lanka‘s government may take away more money from the salaries of private sector workers to set up another pension fund, a government minister said, amid concerns about the management of an existing fund.
The new pension fund may take up to two percent from the salary of a private sector worker and make employers contribute another two percent, labour minister Gamini Lokuge said. The minister said government may also contribute to the new pension fund.
The ‘government’ gets money from taxing the people, borrowing or printing money and creating inflation, but Sri Lanka’s rulers have for years have behaved as if the government has its own sources of money.
State enterprises which could generate money are also making record losses. Critics say any government spending therefore increases the burden on all the people including private sector workers and is therefore a deceptive practice.
State workers and politicians do not have to contribute for their pension and which has defined benefits and gets it from state tax revenues. They also do not pay income taxes on their salaries while private sector workers are forced to pay income tax.
At the moment private sector workers contribute 8.0 percent of their salaries to the Employees’ Provident Fund‘ (EPF) which has been largely used to finance government borrowings at rates that are not fully market determined. The employer contributes 12.0 percent.
Another fund has been made with a 3.0 percent of a salary contributed by employers. Private sector workers have no say on the investment policies of either fund, regardless of their age, financing needs and ability to bear risks.
Even the earnings of the EPF are taxed while state workers and politicians get tax free pensions.
Some have resorted to desperate measures like defaulting on loans collateralized from their pension balances to get the money out. A few years ago an attempt to create a contributed pension fund for state workers was scuttled by the next administration that came to power.