Closing the gap

Adequacy and coverage of pensions in Sri Lanka

Nisha Arunatilake

ContentContent

• What to consider when talking of pensions?

• What are the existing pension schemes?g p

• How sustainable are they?

• What is their population coverage?• What is their population coverage?

• How adequate are the pension amounts?

• How costly to extend to all?

• Summaryy

What to consider when talking of pensions?

Sri Lankan population is ageingSri Lankan population is ageing

Source: Samarakoon and Arunatilake (2015)

There are more elderly females than malesThere are more elderly females than males

Source: Samarakoon and Arunatilake (2015)

Most pension schemes are employment based, but not all females get employed

100

80

90

100

60

70

12

)

40

50

LFP

R (

20

1

Male

Female

10

20

30

0

10

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>

Age groups

Source: Samarakoon and Arunatilake (2015)

What are the existing pension schemes?

• Public servantsbl • Armed Forces Pensions

• Widows/widowers & orphans

• ‘Public servants provident fund’

Public sector

(1901)

• Employee provident fund‘Private sector’• Employee trust fund(1958)

F ’• Farmer’s

• Fishermen’s

• Self employed, etc.

Informal

(1987)

• Public Assistance Monthly Allowance (PAMA)Elderly assistance

schemes Public Assistance Monthly Allowance (PAMA)

• Elderly Assistance Programme (EAP)schemes

(2012 – national)

Informal sector pension schemesInformal sector pension schemes

FMPS 4 1987 AAIB Contributory sub by gov.

FSHPS 4 1990 AAIB Contributory sub by gov.

Migrant worker pension 2008 National Pension Contributory sub by govMigrant 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 govDhanalakshmi7 2006 SSB Contributory sub by gov.

A good pension system isA good pension system is …

ReliableReliable

Covers all

Adequateq

How reliable are the pension schemes?

• Non-contributory - Treasury funded

• Widow(er)s & orphans - contributory Public sector

• Contributory‘Private sector’ ContributoryPrivate sector

• Contributory subsidized by governmentInformal

• Non-contributoryElderly assistance Non contributory

• Treasury funded

yschemes

What share of population is covered?

Coverage of different pension schemes (2012c)Coverage of different pension schemes (2012c)

6,000,000

5,089,0005,000,000

2 334 5963,000,000

4,000,000

2,334,596

1,400,758

1 000 000

2,000,000

64%

0

1,000,000

PSPS Farmers’ Fishermens’ Self-employed Total

38%

Eligible population Enrollees Effective coverage

Source: Samarakoon and Arunatilake (2015)

How adequate are the pensions?

Average monthly pensions (Rs.)

16,675 16,814

16,000

18,000

11,61812,000

14,000

8,000

10,000

4,000

6,000 Poverty line Rs.3781

1,499 1,301 1,000

0

2,000

Civ

il

and

ces

ers'

en's

yed

C

ido

w(e

r)s

ao

rph

ans

For c

Farm

e

Fish

erm

e

Self

-em

plo

y

Wi S

Source: Samarakoon and Arunatilake (2015)

Present value of future pensions (Rs.)p ( )(farmer’s pension scheme - if pension starts at age 60)

45004167

3500

4000

4500 Promised monthly pension

Present value (5% inflation)

Present Value (15% inflation)

25002500

3000

3500 ( )

133312501500

2000

2500

1250

1000

537453 394 471

864

658

500

1000

12 19 40 76

0

18 25 35 40 55-59

Age at enrollmentAge at enrollment

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 Bangladeshnon-contributory e g , d a a d a g ades

• Issues: problems with targeting, costs of targeting

pensions

– means tested

• e.g., Nepal

• Issues: costly benefits also to the

non-contributory pensions • Issues: costly, benefits also to the

wealthy

p

- Universal

Depends on how extended …

Cost and coverage of a universal pension(20% of per capita GDP)(20% of per capita GDP)

Pension cost (% of GDP)Coverage (% of population)

4.6

4.5

5

( )

23

25

g ( p p )

3

3.4

3

3.5

4

15

17

15

20

2.12.2

2

2.560+

65+

70+10

11

10

60+

65+

70+

1.2

1

1.56

5

0

0.5

2015 2030

0

2015 2030

Source: Samarakoon and Arunatilake (2015)

Summary

Issues with current schemesIssues with current schemes

• Immediate need to extend coverage

• Immediate need to improve adequacyImmediate need to improve adequacy

• Reduce dependency on the treasury

• Better choice

Reference:Samarakoon and Arunatilake, 2015, Retirement – can all afford it?, Institute of Policy Studies of Sri Lanka.

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