Closing the gap Adequacy and coverage of pensions in Sri Lanka Nisha Arunatilake
Closing the gap
Adequacy and coverage
of pensions in Sri Lanka
Nisha Arunatilake
Content
• Why talk of pensions?
• What are the existing pension schemes?
• How sustainable are they?
• What is their population coverage?
• How adequate are the pension amounts?
• How costly to extend to all?
• Summary
Why talk of pensions?
Sri Lankan population is ageing
Source: Samarakoon and Arunatilake (2015)
Old age dependency in increasing …
Source: Samarakoon and Arunatilake (2015)
0
10
20
30
40
50
60
70
80
902
00
1
20
04
20
07
20
10
20
13
20
16
20
19
20
22
20
25
20
28
20
31
20
34
20
37
20
40
20
43
20
46
20
49
20
52
20
55
20
58
Child dependency Old age dependency Total dependency
There are more elderly females than males
Source: Samarakoon and Arunatilake (2015)
Most pension schemes are employment based, but not all females get employed
0
10
20
30
40
50
60
70
80
90
100
15>19 20>24 25>29 30>34 35>39 40>44 45>49 50>54 55>59 60>64 65>69 70>74 75>79 80>
LFP
R (
20
12
)
Age groups
Male
Female
Source: Samarakoon and Arunatilake (2015)
What are the existing pension schemes?
• Public servants
• Armed Forces Pensions
• Widows/widowers & orphans
• ‘Public servants provident fund’
Public sector
• Employee provident fund
• Employee trust fund ‘Private sector’
• Farmer’s
• Fishermen’s
• Self employed, etc.
Informal
• Public Assistance Monthly Allowance (PAMA)
• Elderly Assistance Programme (EAP)
Elderly assistance schemes
FMPS 4 1987 AAIB Contributory sub by gov.
FSHPS 4 1990 AAIB Contributory sub by gov.
Migrant worker pension
scheme5
2008 National Pension
Trust Fund
Contributory sub by gov.
Sahana7 1996 SSB Contributory sub by gov.
Thilina7 1999 SSB Contributory sub by gov.
Isuru7 1999 SSB Contributory sub by gov.
Sarana7 2006 SSB Contributory sub by gov.
Surakuma7 2006 SSB Contributory sub by gov.
Dhanalakshmi7 2006 SSB Contributory sub by gov.
Informal sector pension schemes
A good pension system is …
Reliable
Covers all
Adequate
How reliable are the pension schemes?
• Non-contributory - Treasury funded
• Widow(er)s & orphans - contributory Public sector
• Contributory ‘Private sector’
• Contributory subsidized by government Informal
• Non-contributory
• Treasury funded
Elderly assistance schemes
What share of population is covered?
Coverage of different pension schemes (2012c)
5,089,000
2,334,596
1,400,758
0
1,000,000
2,000,000
3,000,000
4,000,000
5,000,000
6,000,000
PSPS Farmers’ Fishermens’ Self-employed Total
Eligible population Enrollees Effective coverage
38%
64%
Source: Samarakoon and Arunatilake (2015)
Enrollment in Pension schemes
Share of 15-59 population in Sri Lanka (2012)
Not in the Labour Force 42%
Not eligible 19%
Eligible , but not enrolled
21%
Enrolled , but not effectively
5%
In a pension scheme
13%
Not in a pension scheme
87%
Source: Samarakoon and Arunatilake (2015)
How adequate are the pensions?
Average monthly pensions (Rs.)
16,675 16,814
11,618
1,499 1,301 1,000
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
18,000
Poverty line Rs.3781
Source: Samarakoon and Arunatilake (2015)
Present value of future pensions (Rs.) (farmer’s pension scheme - if pension starts at age 60)
4167
2500
1333 1250
1000
537 453 394 471
864
12 19 40 76
658
0
500
1000
1500
2000
2500
3000
3500
4000
4500
18 25 35 40 55-59
Age at enrollment
Promised monthly pension
Present value (5% inflation)
Present Value (15% inflation)
Source: Samarakoon and Arunatilake (2015)
How costly to extend to all?
Success of different pension schemes…
• Unsuccessful in low income countries with a large informal sector (Willmore, 2008)
Contributory pensions
• e.g., India and Bangladesh
• Issues: problems with targeting, costs of targeting
non-contributory pensions
– means tested
• e.g., Nepal
• Issues: costly, benefits also to the wealthy
non-contributory pensions
- Universal
Depends on how extended …
Cost and coverage of a universal pension (20% of per capita GDP)
3
4.6
2.1
3.4
1.2
2.2
0
0.5
1
1.5
2
2.5
3
3.5
4
4.5
5
2015 2030
Pension cost (% of GDP)
60+
65+
70+
15
23
10
17
6
11
0
5
10
15
20
25
2015 2030
Coverage (% of population)
60+
65+
70+
Source: Samarakoon and Arunatilake (2015)
Summary
Pension Coverage 60 and Above Population in Sri Lanka (2012)
No pension 50%
Public sector pensions
20%
Informal pensions 5%
PAMA 18%
EPA 7%
Other 25%
Source: Samarakoon and Arunatilake (2015)
Note: EPF, ETF not included
Reference: Samarakoon and Arunatilake, 2015, Retirement – can all afford it?, Institute of Policy Studies of Sri Lanka.