Reforming formal social security system in Sri Lanka

Abstract

Designing a viable social security system in a developing country like Sri Lanka is a complex task. This research work attempts to provide recommendations to reform the formal social security system in Sri Lanka. The thesis has analyzed the components of Sri Lankaa??s formal sector social security system, paying special attention to the two key components, namely mandatory savings scheme administered by the Employeesa?? Provident Fund (EPF), and the Civil Service Pensions Scheme (PSPS). Both the components suffer from lack of professionalism in design, governance structure, and administration. While EPF fails to provide adequate protection, PSPS faces sustainability issues. These limitations become particularly marked when international experiences are examined in the thesis. Thesis further finds that the EPF does not lead to a substantial increase in national savings as substitution of voluntary savings for mandatory savings is significantly large. Key reform directions include a gradual shift towards a multi-pillar system with reformed existing programs.