Don’t encourage EPF members to utilize holdings for current expenditure: CFL

The Ceylon Federation of Labour (CFL) has lodged its objections with Labour Minister Nimal Siripala de Silva over the proposed ‘mild’ amendments to the EPF Act urging that the EPF, being the sole retirement benefit available to private sector “is best treated as a closed scheme and workers encouraged to avoid using moneys lying to their credit for current expenditure.”

CFL General Secretary TMM Rasooldeen in a letter to the minister has pointed out that the proposed amendment “cut across the original objective of the Act which was to provide a tax free benefit to individual members on retirement.”

We understand the reasons you mention for reviewing the pre-retirement benefits but we believe your proposal to completely unlock the Fund works against its very viability, he has said.

In 2010 when the then minister proposed that members be allowed to draw on their EPF balances for medical expenses, the CFL declined to support it “as it overlapped with medical facilities provided by the Employees Trust Fund (ETF) unnecessarily draining member balances available at retirement.”

They suggested instead that the ETF widens the scope of its medical benefits to include the EPF as well.

Rasooldeen said the proposed amendment seeks to allow members with Rs.300,000 or more contributions to their credit over a ten year period to withdraw up to 30% of it for undefined purposes. Saying the EPF as a retirement fund earlier permitted withdrawals for housing purposes considered an investment. But the track record of the EPF Housing Loan Scheme with its 40% default rate suggests even this to have been a failure.

“Since the fund balance of the member is offered as a guarantee to banks and released to cover defaults, it affects member balances in the long term. The CFL has always felt that the pressure to withdraw funds prior to retirement should be resisted by authorities,” he stressed.

“As an organization that stands for secure and strong social protection coverage for workers, we feel the proposed ‘open sesame’ amendment will render a death blow to its already fragile structure. We decline to support them as we are not convinced that they serve the best interests of member-owners of the EPF,” Rasooldeen said..

“Apart from the Parliament of Sri Lanka, it is the owner-members of EPF who have the right to suggest changes to the original objectives of the Fund. The EPF Act does not envisage a role for trade unions. Therefore, it is our firm belief that trade unions in the NLAC (National Labour Advisory Committee) are ill suited to decide on the matter.

“We suggest that a way be found to constructively engage the main stakeholders before effecting the proposed changes to which we object to. We trust you will no doubt appreciate that unions in the NLAC cannot act as proxies to the over 2.5 million who are the owners of the fund.”