Pensions at a Glance Asia/Pacific 2018

Sri Lanka

Sri Lanka: Pension system in 2016.

Employees in the formal private sector are covered by defined contribution plans: Employees Provident Fund, which is used in the model, Employees Trust Fund or approved private sector provident fund. Civil servants were formally covered by public sector pension scheme.

Key indicators: Sri Lanka

	Sri Lanka		OECD
Average earnings	LKR	300 000	5 436 183
	USD	2 021	36 622
Public pension spending	% of GDP	1.4	8.2
Life expectancy	at birth	75.6	80.9
	at age 65	17.1	19.7
Population over age 65	% of working- age population	14.1	23.4

Statlink

Qualifying conditions

At age 55 for men and 50 for women.

Benefit calculation

Defined contribution

Employee’s provident fund is a fully funded defined-contribution plan and employees contribute 8% of wage and employers pay 12%. The entire lump sum, including interest, is paid at the time of exit. The annual interest rate must be at least 2.5%. For comparison with other economies, for replacement rate purposes the pension is shown as a price-indexed annuity based on sex-specific mortality rates.

Variant careers

Early retirement

At any age if the government closes the place of employment, if emigrating permanently, or for employed women who marry.

Late retirement

It is not possible to start claiming pension after the normal pension age.

Personal income tax and social security contributions

Taxation of workers

There is no income tax relief and the deduction of work-related expenses.

Taxation of worker’s income

 

Annual income band	Tax rate
Up to LKR 500 000	4%
LKR 500 001- LKR 1 000 000	8%
LKR 1 000 001- LKR 1 500 000	12%
LKR 1 500 001 – LKR 2 000 000	16%
LKR 2 000 001 – LKR 3 000 000	20%
Over LKR 3 000 000	24%

Social security contributions payable by workers

Employees’ contributions are deductible up to a limit of LKR 25 000 per annum.

Taxation of pensioners

All purchased annuities of retirees are exempt.

Taxation of pension income

 

Annual income band	Tax rate
Up to LKR 2 000 000	0
LKR 2 000 001- LKR 2 500 000	5%
LKR 2 500 001- LKR 3 000 000	10%
Over LKR 3 000 000	15%

Social security contributions payable by pensioners

Pensioners do not pay any social security contributions.

Pension modelling results: Sri Lanka in 2051 retirement at age 55 (men)

Assumptions: Real rate of return 3%, real earnings growth 1.25%, inflation 2%, and real discount rate 2%. All systems are modelled and indexed according to what is legislated. Transitional rules apply where relevant. DC conversion rate equal 90%. Labour market entry occurs at age 20 in 2016. Tax system latest available: 2016.

Statlink