Despite Lower Inflation and Strong Earnings, ETF Yields Fall Short of EPF’s 11% Return
Sri Lanka’s Employees’ Trust Fund (ETF), a key retirement savings scheme for private sector workers, has paid a 10 percent return to its members for the year 2024, according to a report by the Ministry of Finance. While the return matches that of 2023, it falls short of the 11 percent interest credited to members of the Employees’ Provident Fund (EPF), which is also managed by the Central Bank of Sri Lanka.
The 10 percent nominal return to ETF members in 2024 represents a relatively strong performance when adjusted for inflation. With inflation falling by 1.7 percent over the year—compared to a 4 percent increase in 2023—the real value of the ETF’s return has improved. The lower inflation rate also signals a period of monetary stability, despite the Central Bank missing its 5 percent target for cost-of-living adjustments.
In stark contrast, the situation in 2022 was much more challenging. Inflation skyrocketed to 57.2 percent due to aggressive monetary interventions and the sharp devaluation of the rupee. In that year, the ETF was only able to provide a return of 8.75 percent, resulting in a significant erosion of real retirement savings.
Meanwhile, the EPF outperformed the ETF in 2024, crediting its members with an 11 percent return. The EPF earned LKR 65.99 billion in income during the year, largely driven by interest from government securities. This was a slight decline from LKR 67.79 billion in 2023.
ETF financials for 2024 show a pre-tax profit of LKR 63.18 billion, after deducting operational expenses of LKR 2.81 billion, which remained almost flat from the previous year. Of the total return paid to members, 3 percent was credited as interest—amounting to LKR 15.39 billion—while LKR 35.91 billion was distributed as dividends, totaling a 10 percent yield for the year.
The comparison between the ETF and EPF returns underscores growing scrutiny of pension fund performance and the need for better alignment between monetary policy, inflation management, and real income security for retirees. As inflation continues to moderate, real returns on retirement savings are expected to improve, but disparities in fund management outcomes may continue to drive debate over fund transparency and governance.