• While a contributory pension scheme is theoretically sound, informal sector workers query practicality of saving non-existent earnings for a rainy day  

Although the idea of making available a pension scheme for people of all sectors, including those employed in the informal sector, is an attractive plan to ensure some sort of post-retirement financial stability, many in the current economic context are no longer in a position to save money for a rainy day. Surviving each day is the lifestyle that many in the informal sector can afford and are accustomed to, and they value the support they receive now rather than later.

These are opinions shared by many in the informal sector, from various parts of the Colombo District, during a discussion with The Daily Morning with regard to the Government’s plans to introduce a “contributory pension scheme” for those in the sector, especially those who do not receive any employment-related benefits, including the Employees’ Trust Fund (ETF) and the Employees’ Provident Fund (EPF), to which those in the public and private sectors are entitled. As per the reports, this scheme will require an employee to contribute a certain amount for a period of a minimum of five years, which will be returned to those employees post-retirement. 

Short-term versus long-term necessities

“Providing a pension for people like us who have no job stability or job security is important. We could lose our job at any time and many of us do not have the skills or formal qualifications to find good jobs. However, the economic crisis has created more pressing and urgent economic challenges that make long-term welfare schemes of little value to us. No one that works in my field can wait until we retire to benefit from some pension fund.”

Expressing his opinion about the practical usefulness of a pension scheme, 44-year-old street vendor Siri Jayathilaka further opined that while paying attention to forming a pension scheme is appreciable, the Government should prioritise the public’s day-to-day life before making long-term policy and structural changes, stating: “Before thinking about how we are going to eat in several years, we have to eat today. Forget about today, sometimes, when I start my job in the morning, I don’t even know whether I would be able to make enough money to have a lunch packet. Although a pension fund seems important as a theory, we have to be alive until we retire, and to be alive that long, we need support now, not in a few years.” 

Jayathilaka added that the Government should allocate its resources to provide informal sector workers with some support to cover their day-to-day domestic expenses or manage day-to-day business-related losses caused by increased expenses and decreased income.

Meanwhile, 54-year-old lottery seller Anura Kamal (name changed on request), shared a similar sentiment about the need for immediate or short-term support. He added that instead of trying to win the public’s support by showing long-term, grand plans, the benefits of which are unlikely to be received anytime soon, the Government should pay attention to short-term, practically viable social welfare programmes.

He added: “A person has to contribute to their pension for five years, which means that even if we joined this scheme now, it would take at least five years for us to benefit from this. I don’t think that there are too many people who could afford to make such an investment for five years without any benefits. Poor, daily wage-earning people working in the informal sector are definitely not in a position to do such a thing. Instead of showing us dreams of a brighter future, maybe the Government should help us in the present, and we would then be able to build our future ourselves. What is necessary is practically beneficial solutions, and it could be even a packet of rice or an allowance to get medicines when public hospitals do not have medicines.”

In addition, Kamal expressed grave doubts about the effectiveness and implementation of the Government’s plan, adding that this was not the first occasion the Government had made plans to introduce pension schemes for the informal sector which are yet to materialise: “I don’t rely on these promises and I suggest that everyone else does the same. They will take our money very efficiently, but when we need the money after retirement, there will be tons of forms to fill out; we will have to wait in queues for hours or go to Government offices repeatedly, and there is no assurance that we would be able to take back our money at will. I don’t think that I would be a part of this. I think that the Government is just trying to find money to cover its expenses under the guise of helping the poor.”

An attractive but impractical proposal

The practicality of the proposed pension scheme was also questioned by some. Their main question was whether the Government or their employer would contribute to this pension scheme as in the case of the EPF and the ETF. If there is no such contribution, they added, this programme would not be accepted by the informal sector. 

Thirty-eight-year-old vegetable seller Ramya Thisari had concerns with regard to the contribution aspect of the proposed pension scheme. “If the Government is not paying anything to increase what we are paying, I don’t think that this scheme would be beneficial to us in any way. It is like saving our money in a bank only to take it later. This is worse because a bank adds interest to our savings and we can always get more money than we initially deposit. Saving money to use later is not very practical these days. We don’t have money to even cover our daily expenses. But, even if it was an option, I would rather save my money in a bank than give it to the Government.”

She added that if the Government is unable to contribute to the said pension scheme, it should, at the very least, get employers to contribute even a small amount. Without such a plan, she said that informal sector workers would not find the proposed scheme worth being a part of.

In this regard, Kamal raised several questions: “I am expected to pay for at least five years and I am getting that money after my retirement. Now, what would happen if I live long enough to spend all that money? What would happen if the money in my account is exhausted? Do I not get the pension after that point?”

Another concern that they raised was what the age of retirement for informal sector workers would, in a context where their service is not regulated by other laws and regulations, be applicable to the public and private sectors.

Thirty-seven-year-old construction worker Miyuru Senaka (name changed on request), said that since informal sector workers do not have an age of retirement, the Government’s proposed pension needs to be changed to match real-life conditions of the informal sector workers in the country. “We don’t have an age of retirement. If we have not earned enough, we have to work until we die or until we cannot work anymore. I doubt whether the Government took into account that reality when this plan was devised. I think that instead of giving a portion of our income to the Government to take back when we retire, we should save that money in the bank or invest in something.”

Regarding the age of retirement, several others noted that while it may be necessary to identify the age of retirement for the proposed pension scheme, without the support of employers, favourable economic conditions that make it possible for an informal sector worker to retire, and also a system which includes a proper monitoring mechanism, the informal sector would not benefit from it. Therefore, they said that this plan needs to take into account real-life factors that have a direct impact on the retirement and pension of an informal sector worker and should be followed by a number of measures to properly understand the nature of their working conditions.