According to data from the Central Bank, the annual average return on Sri Lanka's Employees' Provident Fund (EPF) in 2022 has fallen to its lowest level in nearly 20 years. The response to a Right to Information request revealed that the return dropped from 11.40 percent in the previous year to 9.52 percent.
Concerns have been raised among contributors regarding the EPF returns since the government decided to include EPF investments in government treasury bonds through the domestic debt optimization (DDO) process. Despite market interest rates exceeding 30 percent at the end of last year, the fund's return remained in single digits. In contrast, in 2020, when market interest rates were in single digits, the fund provided a double-digit return.
Analysts predict that returns will further decline as the central bank has chosen the government's DDO option. A central bank analysis on DDO shows that if the DDO option is not chosen within the next 12 years, the EPF's return could drop to as low as 6.79 percent, compared to 8.02 percent if the DDO option is selected.
The government's decision to include EPF investments under the DDO has faced opposition from trade unions and politically motivated groups. However, parliament approved the move earlier this month.
Since 2005, the central bank, which acts as the custodian of the EPF, has provided the highest return of 16.03 percent in 2009, according to available data.
The EPF, the country's largest pension fund, has nearly 21 million member accounts, including 18.3 million non-contributing accounts due to some members having multiple accounts.
Managed by the central bank, the EPF had a total worth of 3.38 trillion rupees ($10.6 billion) at the end of 2022. Of this, 3.23 trillion rupees (95.7 percent) has been invested in government securities, while 84.1 billion rupees has been invested in listed companies on the Colombo Stock Exchange, according to the EPF's audited financial statement.
