2020 could be tricky for EPF as 20% of population hits 60 years

by Sanath Nanayakkare

Twenty per cent of the Sri Lankan population will hit 60 years of age by 2020 and they will trigger higher EPF withdrawals. To meet this, the shortfall of the EPF will have to be funded, but no computation has been done to that effect up to now, a recent Investment Fund & Asset Management Forum organized by Fitch Ratings Sri Lanka revealed.

Leading market participants including issuers, investors and bankers had gathered at the Taj Samudra Hotel, Colombo to listen to Fitch’s senior analysts, external guest speakers and panelists discuss developments in the asset management industry globally. Maninda Wickramasinghe-

Country Head Fitch Ratings Lanka Limited led the discussion.

Pension fund assets are about 1.9 trillion rupees with the Employees’ Provident Fund (EPF) holding close to 1.5 trillion rupees of that. There is a huge mismatch in pension/provident funds as long-term liabilities have been invested in short-term assets, it was further revealed.

Meanwhile, in Sri Lanka, 60% of the financial assets are in banks and in other financial institutes. Most Sri Lankans are risk-averse when it comes to investing, so they are satisfied with a return of 6-8% interest accrued on a bank deposit. But in China, money is not held in banks due to negative return. Instead, what takes place there is investment in assets, the Fitch Forum noted comparing the regional situation.

Sri Lanka has only 6% of assets in equity, while some other emerging markets allocate as much as 30-40% in equity. Meanwhile, single-family offices in Sri Lanka that manage their own financial affairs and funds have more wealth than the country’s Equity Funds. Lack of financial literacy in asset classes and the dependence on returns from bank deposits are the main reasons behind the non-investing tendency of Sri Lankans, the FITCH forum noted.

An investment advisor speaking to The Island Financial Review on condition of anonymity said," It’s no wonder that so many people say investing is risky. In fact, investing isn’t risky but being financially illiterate is."

He further said," If you plan to become rich by being an investor, i’d say that having a good working knowledge of a financial statement is a minimum requirement. The average investor looks primarily at price as the opportunity to buy or sell, but the sophisticated investor has trained his eye to see the opportunity than the price. He knows how to grab the good deal and duck the bad deal".

animated gif
Processing Request
Please Wait...