Pension Problem
The recent political scene is seeing a new topic being hotly discussed. We do not not know if the government is serious about the Private sector pensions or it is just a diversion tactic to coincide with the more burning issue of the UN SG’s ‘War Crime’ report.
Nevertheless the idea of pensions for private sector workers is a good idea. But the method it was introduced and handled raises many questions.
Already the private sector employees contribute to the EPF-ETF funds which they receive at the time of retirement as a lump sum saving which could be invested in a fixed deposit off which many survive. Financially informed retirees who can well manage their funds can make go for a better return investment.
But still the funds are managed by the State until retirement. The danger is that, with our track record of a political culture of nepotism if and when a government appoints people unfit to manage the huge funds-which do not belong them- the state is placing the lives of millions in grave danger.
And already there are charges that the present regime was mismanaging the presently existing funds. That the interest returns of the funds are far less than the inflation, thereby giving the earners a negative return.
So much for the Pension Fund management .
It is in this context that the government has brought up a bill for a pension scheme for private sector workers.
With a government that has brought up a bill for a pension scheme for private sector workers.
With a government basing its primary support in the State sector employees, giving far too many goodies than they probably deserve, this move is bound to irritate the private sector workers, who had been always seen as hard working and efficient.
On the other hand the State sector employment is- which is a well known fact- that is thought to be thoroughly corrupt. Apparently ministry secretaries poke their fingers in placement by passing the rules and stipulations laid down by the British Colonial masters which are mainly merit based.
Coming back to the Pension bill things are getting hotter by the day, with trade unions and some political parties going to courts over the bill.
The thing is that a cash strapped government which spends 85% GDP in loan servicing (with 10% total loans had gone to the private coffers of many a smart politico), the move would always be looked upon with suspicion. The 'pension plan' also comes at a time when the state already takes away 20 percent of a private sector workers' salary into a state managed pension fund, whose management has come under increasing fire in recent years.
The new bills to create another forced savings fund by taking away 4 percent of private sector salaries has been also called an attempt by the state to further plunder private sector worker's earnings.
It has been perceived as a new deficit financing tool at time when the existing private sector retirement, which is the key deficit financing tool for the state, may face nett withdrawals in the next few years due to a rapidly ageing population.
Many would have noticed that many private insurance cos are coming up with pension plans already.
A letter by Chnadra Jayaratne a well respected financial expert points this out.
“They may conceive that the scheme has been designed in a manner to meet other motives of the government and to leverage a pool of captive investments with which the government may control the securities markets and derive benefits of lower interest costs to government which would further enable the government to use funds generated to control private sector establishments through market mechanisms. If so perceived the proposed scheme would be tantamount to a practice akin to policy capture corruption.”
The government needs accountability, transparency and perhaps more public debate on the bill before it is passed.
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