By a special correspondent
Sri Lanka’s renewed push to convert the Employees’ Provident Fund (EPF) into a pension-style scheme has been presented as a progressive step toward protecting private sector retirees. Yet beneath the reassuring language of “social security” lies a reform that demands far more scrutiny, consultation, and caution than it has received so far.
Sri Lanka’s proposal to transform the Employees’ Provident Fund (EPF) from a lump-sum retirement payout into a monthly pension marks one of the most significant potential reforms in private sector social security, Deputy Minister of Labour Mahinda Jayasinghe Announced in early 2026 and reiterated in Parliament recently.
At the heart of the proposal is a valid concern: private sector workers face insecurity after retirement when EPF savings are paid out in a single installment. However, solving this problem by restructuring the EPF into a pension fund under Treasury control raises critical red flags. History, governance weaknesses, and the absence of stakeholder engagement threaten to undermine what could otherwise be a meaningful reform.
First, trust is a fundamental issue. Workers contribute to the EPF over decades, viewing it as their personal life savings. Any move to restrict access, delay withdrawals, or channel funds into a centrally managed pension pool will inevitably be perceived as state control over private assets. This fear is not theoretical. A similar attempt in 2011 to carve out a pension scheme using EPF funds collapsed after mass protests, driven by suspicion that the government sought cheap financing rather than worker welfare.
Second, the lack of consultation is deeply problematic. Trade unions have publicly stated that they have not been formally informed or consulted about the proposed changes. Pension reform without the participation of workers’ representatives risks resistance and legitimacy failure. Any pension scheme must remain optional, flexible, and respectful of diverse worker needs, including early retirement, migration, or self-employment after formal work.
Third, governance and fiscal discipline remain unresolved. Shifting EPF and ETF management from the Central Bank to the Treasury raises concerns about political influence, especially in a country grappling with fiscal stress. Without ironclad legal safeguards, there is a real risk that pension funds could be used to bridge budget deficits or support state borrowing at below-market rates, eroding long-term returns for contributors.
There is also a demographic and actuarial reality to confront. A pension is a lifelong obligation, not a one-time payout. Poorly designed pension formulas, unrealistic return assumptions, or weak investment management could leave future retirees underfunded while creating liabilities for the state.
None of this means the idea should be abandoned. But reform must start with transparency, choice, and consent. A hybrid system where pensions are optional, professionally managed, independently regulated, and insulated from political use would stand a better chance of success.
Sri Lanka’s leaders must recognize that retirement reform is not merely a technical exercise. It is a matter of trust. Without earning that trust first, even the most well-meaning pension initiative may fail before it begins.