A Proposed employees provident fund equivalent post - employment pension scheme

Abstract

The labor force in Sri Lanka can be mainly divided in to two sub sectors as government sector and private sector. Government sector employees are benefited with a monthly pension income while private sector employees are received a lump-sum retirement benefit which is known as Employees Provident Fund (EPF) payment. However most of the employees like to have a monthly retirement benefit than a lump-sum benefit, thus majority of the private sector employees demand for a pension scheme which is similar to the government sector instead of EPF. In Sri Lanka five main employment-based pension schemes can be found. The Public Service Pension Scheme (PSPS) is a non- contributory pension scheme which is governed by the Pension department of Sri Lanka. Employees Provident Fund (EPF), Farmers‘ Pension and Social Security Benefit Scheme (FMPS), Fishermen‘s Pension and Social Security Benefit Scheme (FSHPS), The Self-employed Persons Pension Scheme (SPPS) are the other mainpension schemes and these four schemes are being contributed by the employees and/or employers.Previous studies proved that 18 per cent of the working age population is covered by these schemes, while the effective coverage is estimated to be only 13 per cent. These statistical measurements depict an upcoming crisis in Sri Lankan workforce within next few decades. This thesis was carried out to address the issue using an actuarial model and design a sustainable pension scheme which can fulfill the requirements in post-employment period of private sector labor force in Sri Lanka. This study has been introduced a contributory pension scheme for the private sector labor force in Sri Lanka. The contribution is equivalent to the existing total EPF contribution of employee and employer which is 20 percent of the salary (8% by employee and 12% by employer). The Employees, those who have longer service period or higher salary scales are the most benefited party from the EPF equivalent post-employment pension scheme. The lowest monthly benefit value at the benefit period of an employee is greater than his or her monthly contribution at the contribution period. Annuities and life tables are the basic tools which are used to develop the scheme. According to the proposed scheme by this study, an employee who can contribute Rs. 17000.00 per month for a period of 21 years will be benefited with a monthly income of Rs. 59640.80 starting from his age of 55 to, until his death or age of 105. It is proved that the EPF equivalent pension scheme is more effective than the government pension scheme which is introduced for the Tri forces staff members in 2019 September, for 64 % of the employees in the considering sample. Employees‘ monthly benefit of the considering sample is varied between Rs. 3607.81 and Rs.63797.41 depending on the contributing amount and the contributing period. Thus, it is actuarial scientifically proved that EPF equivalent pension scheme for the private sector labour force in Sri Lanka is a realistic project.