Saturday, June 27, 2015

People's Bank's pension 'anomaly'

The Pensioners' Association of People's Bank has appealed to President Maithripala Sirisena, demanding that an independent Commission of Inquiry be set up to address grievances. There are allegations and accusations involved. These include a fraud that (as the Association states) is costing pensioners what they are owed.

This is not the first time an association of (former) employees has appealed to have their grievances addressed. What stands out here however is what is being alleged. What stands out here is the claim that this Association’s members are having one foot in the grave. They are dying.

Here's a bit of history. During Ranasinghe Premadasa's presidency, a circular issued by the Public Administration Department in 1990 (number 44/90) sought to downsize state institutions. It did this by restructuring the then pension scheme for public officers. By replacing a system of a fixed commuted lump sum deductible from monthly pension payments with one involving a non-deductible scheme, it tried to encourage retirement at 55.

No state-owned bank implemented this then. On 7 June 1996, however, People's Bank went ahead. The circular itself was withdrawn by December that same year. The Bank nonetheless, ostensibly to encourage retirement (as the government had tried), offered 90% of the last drawn salary for retirees as a concession, non-deductible and applicable to those who had completed at least 20 years of service.

Meanwhile, new pension regulations were introduced. Under these, the early retirement age was extended to 58, extendable up-to 60 upon application at the management's discretion. But the original format, with its non-deductible structure, continued to apply to the bank's employees. This was done even after Circular 44/90 had been withdrawn in December. A fraud? Tennakoon Rusiripala, President of the Pensioners' Association (who spoke to "The Nation"), thinks so.

Problems emerged slowly. Under the 1996 scheme, the bank was liable to pay retirees a non-deductible lump sum amounting to 24 times his or her salary, together with an increased monthly pension representing 90% of the last drawn salary. That had to be accounted for in the Pension Trust Fund. That had to be paid. And that payment had to be justified.

What happened next was arbitrary. To compensate for the huge liability that the 1996 scheme created, the management in effect "froze" the Variable Cost of Living Allowance (VCOLA) for those who fell under it. This was done with no procedure or announcement. It meant that the allowance payable and paid at that time continued without adjustment. To date.

The injustice, Rusiripala explains, lies in the rift between those who continue to draw the variable COLA and those to whom the 1996 scheme applies. In the latter case, the allowance is the same as it was when they applied for their pension. So a person drawing a cost of living allowance of 5,000 rupees at retirement would get that amount even now. A person retiring before 1996 would get it varied.

We can assume this was a mistake. We can assume this wasn't fraud. We can also assume other things. Things that are yet to be proven. Like how the Pensioners' Association, after all this time, is yet to come to a settlement. Or how lawyers representing the Bank have managed to defer reasonable settlement, on grounds of what Rusiripala claims are irrelevant legal points.

This last of these is interesting. Rusiripala accuses the Bank's lawyers of raising objections on immaterial grounds.

Here’s what happened. In 2009, the Association appealed to the Labour Tribunal. In face of objections by the Bank’s lawyers and their demands for withdrawal of the case, the then president of the Tribunal, V. I. Jayasuriya, refused to budge. As response the Bank appealed. To courts.

When the dispute reached the Court of Appeal, the judge withdrew the entire case (number CA 262/10). This was on condition that the Bank could raise the same objection(s) as before should the dispute arise again.

Two more arbitrators followed. The Bank questioned the first’s legitimacy on grounds of his perceived “interest” in the case. The second withdrew himself from it altogether after his appointment. Now the pinch to all this, Rusiripala says, is in what would happen even if an arbitrator is appointed again. Since the original case was withdrawn on the condition that the Bank could raise the same objection(s) as before, its lawyers probably would delay the case once more through appeal.

We can, of course, infer that this is what lawyers do. We can reserve judgment and say that all those legal issues raised by them are innocent. And justified. In the meantime, however, settlement is being delayed.

As Rusiripala tells me, the pensioners he represents were set to benefit from the 1996 scheme.  But by freezing the VCOLA to compensate for higher pension payments, the bank ended up compressing those same payments. Unreasonably.

This is worrying. It reflects badly on the bank. If at all there's a reason for a continued delay in a settlement, it is this: that if what is owed to all the affected pensioners is given in one go, the Bank will collapse.

It (almost) happened before, folks. Back in 1992, the World Bank estimated nearly four billion rupees owed by People's Bank to its Pension Fund. It foretold "bankruptcy". As at December 2014, according to Rusiripala, that debt stood at 7.9 billion. That represents a failure by the Bank to provide and set aside money for the Fund. But this debt was calculated at the then prevailing IR rate of 9%-10%. At the current rate of 7%, it would rise. It would stand at about nine billion rupees.

Now here’s the pincer: if four billion rupees (of debt) could "signal" bankruptcy 13 years ago, would it be the same with nine billion today?

This is all conjecture, we admit. Here are some other facts then. The Association has appealed repeatedly. It appealed to the former president towards the end of his term. Mahinda Rajapaksa requested the Secretary of the Treasury P. B. Jayasundera to intervene. Elections came. He lost. A new government took over. The Association has appealed again.

Through all this, one thing stands out: the fate of all those affected.

Let's not forget, after all, that it is those who earned meagre salaries who are worst affected by this. Let's not forget that they worked the better part of their lives underpaid and in a (relatively) thankless job. Let's not forget that those in the Bank's top hierarchy (as well as those lawyers), who continue to defer and delay what these people want, are earning big bucks. And let's not forget the demand made by Pensioners' Association: to resume with the VCOLA without making it retrospective, that is without settling the entire amount owed to affected pensioners since 1996.

In this context it would pay to respond. The Bank has nothing to lose. Unless it chooses to do nothing. Right now, that's not a good option. If allegations are indeed worth a dime a dozen, it's time People's Bank stood up. Time it offered justification. To the people.