|
Poser
on premium interest rates for TB investing EPF members
The
proposal by the Government to offer EPF and other provident
fund beneficiaries premium interest rates if they are
investing in Treasury Bills whilst welcomed has drawn
lot of questions with financial circles.
The Minister of Labour announced that in collaboration
with the Central Bank of Sri Lanka, a novel scheme has
been introduced which allows Provident Fund Beneficiaries
(including private sector employees) to invest in Government
Treasury Bills at a 10% premium over the current market
rates and receive interest monthly/quarterly or annually.
It was also reported that investors in the scheme would
at a future date have the option of converting to a
pension scheme.Former Ceylon Chamber of Commerce Chairman
and Managing Director of Eagle Insurance though welcoming
the move has raised several questions. He has urged
the Government to announce clear details in order that
public become aware of the proposed scheme.
He was of the view that such an announcement should
inter alia clarify the following issues as well;
- The
definition of “Provident Fund Beneficiaries”
entitled to invest in the scheme?
- Are
the investments so made directly in Treasury Bills
by the beneficiaries in their own names or made through
the Central EPF, with the EFP as the composite investor,
(being an extended investment benefit post retirement
for those investors leaving their EPF entitlements
within the Fund)?
- Are
the investments as proposed made in normal Government
Treasury Bills or in a special category of Treasury
Bills floated for this purpose?
- What
is the expected tenorof these Treasury Bills?
- Will
these Treasury Bills be automatically reinvested in
Treasury Bills on maturity at the then prevailing
rates and at a 10% premium?
- What
formulae will be applied in determining the investment
yield applicable to beneficiaries (in relation to
12 month Treasury Bill rate) where they opt to receive
interest monthly/quarterly?
- Are
there any charges levied for investment management
and payment of monthly/quarterly and annual interests
to beneficiaries and if there are no such charges,
who will bear these expenses?
- Will
the interest received by beneficiaries be treated
as post withholding tax payable income, as secondary
market investments and hence be free of taxation in
the hands of the recipients?
- Will
the investors be able to obtain a temporary borrowing
facility up to a defined limit or be able to prematurely
withdraw these investments in full or part and if
so what facilities, terms and early withdrawal penalties
will apply?
- Provide
full details of the proposed conversion option to
a pension, clarifying whether it will be a pension
or an annuity that is proposed, and also whether it
is a life time pension/annuity or a fixed term
pension/annuity that is proposed and further giving
details of how the premium rate of return now offered
above Treasury Bills will be converted and embedded
as a implicit long term confirmed rate of interest
in the pension computations
- Will
this opportunity be open to be availed of by persons
who have previously retired and have withdrawn their
EPF benefits and have invested such funds in other
investment options?
- How
will this scheme accommodate persons who are retiring
members of Private Provident Funds?
- clarify
the applicable legislation and the specific
provisions of the law under which this scheme has
been introduced In the interest of the stakeholder
group targeted and motivated by this scheme, Mr. Jayaratne
also suggest that the Ministry of Labour and the Central
Bank should validate the potential risks, in the undernoted
areas
- legal/regulatory
compliance,
- financial
sustainability in the long term
- economic
viability in the longer term
- operational
and services efficiency/effectiveness in the longer
term.
|
|
