Private pension pains go to President

By Uditha Jayasinghe

Given the serious implications the private sector via the Joint Business Forum (JBIZ) has fired a letter to President Mahinda Rajapaksa ahead of a tripartite meeting next week on serious concerns over the proposed new Pension scheme.

Comprising all leading chambers of commerce and industry, trade associations as well as the Employers Federation of Ceylon, the JBIZ’s letter containing concerns as well as suggestions over shortcomings had been despatched to President this week.

The letter was sent ahead of a 25 April scheduled meeting between President, representatives of the private sector, trade unions as well as the National Labour Advisory Council.

The contentious new pension plan has been challenged in the Supreme Court as well by the Ceylon Bank Employees’ Union (CBEU). The proposed Act to establish an employees’ pension scheme benefits fund for the private sector was initially to be tabled in parliament on 27 April.

The thrust of the private sector submission is that there needs to be an actuarial study and a proper consultative process set in motion before the country embarks on a pension scheme for the private sector. “It is clear that the employees will be the loser if this goes ahead,” JBIZ Chairman and Immediate Past President of the National Chamber of Commerce Lal de Alwis who is a signatory to the letter that was handed over to the President.

“We believe that the existing mechanism is better. There should have been more consultation between the private sector, trade unions and Labour Ministry since this is a pension scheme drafted for private sector workers but that did not happen.”

De Silva insisted that the labour market would be adversely affected with apparel probably among the hardest hit if the proposed Pension Act goes through without any amendments. The letter has dealt with each of the issues presented by the Act one by one and pointed out the detriment to workers, he remarked adding that they hoped the President would view it before the meeting on Monday.

EFC sources said that it was extremely important to ensure that the new scheme can be sustained whilst it also does not ensure a lifelong payment to the employee or his dependents in the event of his or her death.

 The latest Bill has also taken out the provision that states it is a voluntary scheme. Much to the disappointment of members of the tripartite NLAC, the draft Bill presented to Parliament was not the copy that was circulated which confirms there had been inadequate consultation and consensus.

The CBEU in its petition to Supreme Court said the bill is inconsistent with the Constitution and violated in many ways.

Among other issues the CBEU is contesting is that the scheme is mandatory for every employee; there are contradictions in the bill itself as to who becomes members; that it imposes restrictions to legal heirs to claim lump sum amounts upon the death of a member who has fully contributed to this scheme. It says the scheme must be made voluntary.

The petition says that under the bill once an employment is declared to be a ‘covered employment’ the employees concerned in these employment categories automatically become members without their consent to joining it. All workers who become members of the fund are forced to forgo a certain percentage of their remunerations to be remitted to the said fund. Workers don’t have any choice but to remit their hard-earned remuneration to the fund against their will, it said.

 “.. there are no provisions whatsoever in the bill to the effect that the worker and in his absence his dependents will be entitled without any hindrance to the amount so deducted from the worker and to the interest accrued to that amount,” the petition said.

It said workers who make contributions must have a minimum period of 10 years of contributions to qualify for a pension. If an employee does not have the respective number of years required he or she will have to make the balance payments relating to such period, without being employed, which would also include the monthly contribution of the employer as well.

If the employee is unable to make this balance payment he will stand to lose all deductions that were made from earnings. The petition says a large number of young female employees are employed in industrial and export processing zones and the duration of employment of most of these employees is often below 10 years. In such instances, they will stand to lose their remunerations.

The petition has also raised issue over withdrawal of the remittances before a worker completes 10 years of service. Early withdrawal would entitle the worker to only 60% of the contributions.