When Sanaj Khatiwada of Sunrise Bank died in August 2020, his family approached the SSF for compensation. The fund ordered the bank to pay Rs4.3 million in restitution, derived from 60% of the employee’s monthly salary as decreed by the Social Security Scheme Operating Procedures 2018.
Global IME Bank was also ordered to pay Rs10.5 million to a victim’s family in a similar case in March. Both banks were not part of the SSF at the time and bore full financial responsibility.
SSF spokesperson Bibek Panthi claims that the fund was designed with workers and employees at its centre, and that no benefits will be stripped away upon joining it.
“The SSF was set up to ensure that workers couldn’t be exploited and to secure post-retirement life. All benefits outlined in Article 178 of Labour Act 2017 are enshrined by SSF,” he says.
However, upon closer inspection of the provisions, one can see why the workers and businesses are up in arms.
Entirely contribution-funded, 31% of the basic salary of each employee (11% by workers and 20% by company) must be deposited into the SSF, but some companies are making workers deposit up to 20% out-of-pocket. These are significant financial undertakings in times of slashed income due to the pandemic-induced economic collapse and job losses.
When inflation and interest are taken into account, subscribers will in fact lose money. Even so, one must wait until age 60 to receive monthly pensions, but any amount accrued before 60 cannot be withdrawn post-retirement. Monthly accumulations cannot be withdrawn all at once post-retirement, either.
Also, funeral costs, accident insurance and medical coverage are not covered after three months of retirement. Moreover, the dependent spouse will receive only 50% compensation if the employee dies after 15 years of receiving the pension.
“Saving 30% of salary in the current economic climate is difficult for many, people must have the freedom to choose when it comes to safeguarding their money,” says the former chief of the investment department of Employees’ Provident Fund Arjun Gautam. “It is counterproductive to force customers to leave government-run funds and join another one.”
There are also doubts about whether the government can handle sole responsibility for the social security of private workers, especially as the informal sector has not even been factored in. The government plans to cover over three million social taxpayers with the SSF. But as of now, only 14,738 employers and 257,817 contributors are registered from an estimated 923,000 private institutions across the country.
With current contributions standing at Rs6.65 billion, experts fear the fund may be financially incapable of handling the tenfold increase in outlays and deposits if and when the informal sector is roped in.
In fact, the SSF is serving the same purpose, but only worse, that existing government schemes provide. The Citizens’ Investment Fund and Employees’ Provident Fund provide hybrid and public sector coverage respectively, with the former already offering 11 service pensions and insurance schemes.