Sri Lanka’s largest pension fund, the Employees’ Provident Fund (EPF), has been found to have lower transparency and disclosure standards compared to publicly listed companies, commercial banks, and unit trusts, according to a recent report by Verité Research, a think tank based in Colombo.
In their statement, Verité Research noted that the EPF provides less information, with less detail, less frequency, and less promptness than these other financial entities that manage public savings. This disparity indicates that the Central Bank of Sri Lanka (CBSL), which oversees the EPF, applies less stringent transparency requirements to the fund compared to the standards imposed on other regulated financial institutions.
The report highlighted the legal obligation of private-sector employees to contribute to the EPF, while also noting that these individuals do not participate in the fund’s management and are unable to withdraw their savings freely. This lack of control amplifies the need for higher levels of transparency to safeguard the interests of contributors.
Additionally, Parliament member Ravi Karunanayake emphasized the impact of a recent fraud incident involving the National Development Bank PLC (NDB), which amounted to 13.2 billion. This incident has had significant repercussions for the EPF, given that it holds approximately 9.46% to 9.50% of NDB’s total equity.
The report, titled ‘The Employment Provident Fund in Sri Lanka: A Comparative Assessment of the Adequacy of Information Disclosure,’ highlights that the EPF does not meet international standards for timely and detailed public disclosures, as outlined by the OECD’s International Organisation of Pension Supervisors (IOPS) principles and the Global Pension Transparency Benchmark (GPTB).
The necessity for improved transparency is particularly pressing given the historical issues of financial misconduct associated with the EPF, highlighted by forensic audits released in 2019. To address these deficiencies, Verité Research suggests three immediate reforms: ensuring full compliance with the EPF Act, adopting international best practices, and implementing a private member’s bill on EPF disclosure in 2024. In the long term, they advocate for stronger regulations to protect the interests of EPF members and maintain the integrity of the fund.
For further details, the complete research brief can be accessed through the report titled ‘The Employment Provident Fund in Sri Lanka: A Comparative Assessment of the Adequacy of Information Disclosure.’
