2000年-世界发展银行全球_Review_of_Superannuation_Benefit_Programs_in_Sri_Lanka_71页_4mb

Summary of the Review of Superannuation Benefit Programs in Sri Lanka

Core Content

This report provides an analysis of the superannuation benefit programs in Sri Lanka, focusing on their adequacy, fiscal sustainability, and impact on labor market mobility. It was prepared by a World Bank mission in July 1999 and outlines a reform strategy for the pension system, emphasizing the need for improved efficiency, cost-effectiveness, and integration with broader social and economic frameworks.

Main Points

Current System Overview

• Aging Population: Sri Lanka is experiencing rapid aging, with the proportion of the population over 60 years expected to rise from 9% to 20% by 2025.
• Dependency Ratio: The overall dependency ratio (dependents as proportion of working age population) is likely to remain stable or decline.
• Formal Sector Coverage: Only about half of the labor force is covered by formal retirement savings schemes.
• Key Schemes:
  • Employees' Provident Fund (EPF): The largest scheme, covering three million formal sector employees, with 98% of assets invested in government debt.
  • Public Service Pension Scheme (PSPS): A generous non-contributory scheme with a 85-90% replacement rate, but with significant fiscal implications.
  • Approved Private Provident Funds (APPFs): Privately administered, with 204 funds covering 164,315 members, but not fully regulated and with mixed confidence from members.
  • Employees' Trust Fund (ETF): A mandatory scheme for the private sector with poor investment returns and political influence.
  • Gratuity: A mandatory scheme for private sector employees, with benefits based on years of service.
  • Voluntary Schemes: Targeting informal sector workers, such as farmers, fishermen, and self-employed, but not self-sufficient and underfunded.

Issues Identified

• Adequacy of Benefits: Most schemes provide inadequate replacement rates, especially the EPF at 25% of final wage, far below the desired 40% for lower-income countries.
• Fiscal Sustainability: The PSPS represents a significant fiscal burden, accounting for 1.9% of GDP and 9.8% of recurrent government expenditure. The EPF and ETF also contribute to fiscal strain through below-market investments.
• Labor Market Mobility: The lack of portability in public sector pensions discourages movement from public to private sector employment.
• Administrative Inefficiency: Many schemes are poorly managed, with low returns and high administrative costs.
• Hidden Costs: Mandatory contributions and benefits in some schemes are not aligned with actual needs and may lead to hidden fiscal costs.

Key Recommendations

• Improve and Rationalize Contributory Schemes:

  • Allow transportability and beneficiary choice for pension contributions.
  • Develop a regulatory framework for APPFs and allow new multi-employer APPFs.
  • Wind down ETF, PSPF, and gratuity funds, and cap mandatory contributions to provident funds.
  • Allow foreign investment and develop a government-insured annuities market.
  • Liberalize interest rates and allow private sector asset management.
  • Disallow loans to provident fund members.

• Reform Public Service Pension Scheme (PSPS):

  • Gradually increase retirement age.
  • Reduce or eliminate commutation rights.
  • Freeze or slow down voluntary schemes to avoid future fiscal costs.

• Review Role of Pensions in Social Security:

  • Rationalize and limit growth of voluntary contributory defined benefit (DB) programs.
  • Align pension systems with broader social safety nets, including informal and family support.

Fiscal and Economic Impact

• EPF's Role in Government Debt: The EPF holds 36% of government domestic debt, with 98% invested in government securities, leading to a fiscal burden.
• Potential Fiscal Savings: Reforming the EPF and ETF to market rates could reduce fiscal costs, but may also increase the deficit by up to 1% of GDP.
• Interest Rate Adjustments: Moving to market-based interest rates would increase the cost of government debt, but is necessary for fiscal sustainability.
• Long-Term Debt Consideration: The report suggests that the government should consider increasing its reliance on long-term debt and equity securities to reduce reliance on short-term instruments.

International Experience

• Coordinated Approach: Emphasizes the need for a comprehensive and integrated social risk management framework.
• Reduction of Administration Costs: Suggests moving towards more efficient and less costly pension systems.
• Informal Support Systems: Acknowledges the importance of informal and family support in old age, which remains a significant component of elderly care.
• Funded vs. Unfunded Schemes: Highlights the importance of developing funded schemes and improving the role of financial markets in pension funding.
• Tax Reform: Suggests that pension systems should be aligned with tax policies to ensure transparency and efficiency.

Conclusion

The report recommends a phased reform approach, focusing initially on improving the efficiency and adequacy of contributory schemes. It emphasizes the need for the government to take a proactive stance in addressing the fiscal and administrative challenges of the current pension system, while also considering the broader implications for labor market mobility, financial market development, and social protection. The ultimate reform strategy should be shaped by the government's response and priorities, with the World Bank prepared to support further analysis using its Pension Reform Option Simulation Toolkit (PROST).