Plight of the pensioners of People’s Bank

Ex-Government servants finally heaved a sigh of relief by the recent pension revision to their decade-old grievance over the continuing paltry pension. People’s Bank is also a fully State-owned institution which has hitherto followed the Government Pension Scheme adopting all previous pension amendments of the Government.

This article by the People’s Bank Pensioners’ Association, besides articulating the need to adjust the Bank Pension Scheme in line with the recent Government Pension revision, also highlights several shortcomings of the scheme, detrimental to the future of the bank and thereby to State coffers. The unbearable hardships caused to several thousands of early retirees of the bank in all grades of service, who worked hard to build up the bank, are also highlighted.

1. Some reflections on the People’s Bank’s 1996 Pension Scheme

Following the then Government policy thrust to downsizing and/or rightsizing the State sector, the People’s Bank ostensibly implemented a new retirement scheme in June 1996 whereby the hitherto mandatory age of retirement was reduced from 60 to 55 with a proviso for extension of service up to 60 at management’s discretion.

This scheme was subsequently changed to the old system but regrettably, the successive Boards of Directors have failed to revisit it either on their own initiative or in response to representations made to them by the retirees collectively and/or individually from time to time.

The authorities are therefore urged to take stock of what happened in the past and bring about order in the bank’s retirement scheme by ensuring that it would be (a) structurally sound, (b) financially viable, (c) humanely equitable and (d) strategically pliable in the bank’s manpower planning.

 

2. Phase 1, decision

2.1. The downsizing program in the People’s Bank

The Government’s policy initiative to downsize the State institutions was a plausible attempt from an economic perspective (Ref. Public Admin Circular 44/90) aimed at restructuring the highly unionised and inefficient State sector.

However, sadly, in the People’s Bank the downsizing program got under way as a subtle and rather vindictive campaign against the older generation of employees, particularly the senior executives.

2.2 Failure to learn from the bank’s own past failings in its pension funding

The bank was well aware of the huge shortfall it had in the pension trust fund a few years ago even at a time when its salaries and pensions were relatively low as revealed by the International Auditors in 1991 and that it was surviving on a Government lifeline of 30-year Treasury bonds ever since.

Had they ever felt shy of and learnt lessons from such past failings they should have been doubly concerned about the impact of the new scheme on the pension trust fund that is obviously likely to aggravate with the periodic salary revisions.

2.3 Ignoring the BOC and NSB and consulting the Treasury

The People’s Bank being State owned, under the purview of the Ministry of Finance and largely parameterised by the “common collective agreements” bearing on its remunerative and reward structure, should not have deviated from the BOC and NSB in the matter of its early retirement scheme involving serious changes such as follows.

(a) Converting the commuted pension from “repayable” into “non-repayable”

(b) Raising the monthly pension rate from 85% to 90% of the last drawn salary

(c) Freezing of Variable Cost of Living (VCOLA)

In the later years, in its naïve attempts to dodge the pensioners’ demand for rectification of the anomalies arisen from these changes, the management said that no rectification was possible without the “Treasury approval’.

If the management ever did consult the Treasury before introducing the scheme is not known. If it did, how was it possible for the Treasury to approve such a disastrous scheme that is exclusive to People’s Bank without consulting the other two State banks calls for investigation?

2.4 The freezing of VCOLA without proper understanding of its many ramifications

The freezing of VCOLA has resulted in those retired after 1996 being paid the amount of COLA at the same rate that existed in the month of their retirement. Accordingly, for the past 19 years, there are as many as 228 different batches of pensioners receiving different amounts of COLA ranging between Rs. 4,000 and over Rs. 25,000.

The decision to freeze VCOLA is known to have been taken by the then General Manager arbitrarily without the Board’s concurrence. This glaringly wrongful decision has not been investigated or rectified to date despite repeated requests and agitations by the pensioners who have been seriously affected by the low COLA rates and low pensions.

 

3.0 Phase II

3.1 With the introduction of the early retirement scheme in 1996 coupled with the freezing of VCOLA the Bank’s remunerative and reward structure lost its integrity, which eventually turned out be a scam as the blunders thereof began to be exploited for individual gain.

3.1.1 Discrimination in the process of granting service extensions

The new scheme created ample room for the management to interfere with the fairness in the process of granting/rejecting extensions of service thus paving way for discriminatory individual treatment.

The management avoided putting in place a credible mechanism to ensure that the best and the indispensable only are retained beyond 55 under compelling circumstances.

Consequently, the extensions up to 60 came on a platter for the favoured while the others, some of whom quite vindictively, had to retire early.

The “extensions” would mean the annual increments, bonus, promotions scholarships, foreign travel, upward salary revisions and even much higher COLA as well as the opportunity to walk away with a compensation package as if they were also seriously affected by the early retirement scheme.

On the other hand the employees who had to retire early would not only lose all such benefits and privileges but also have to suffer the humiliation of being labelled as redundant, unwanted and useless.

Eventually the granting of extensions through to 60 became the order of the day rather than the exception so much so that the “55 rule” was abandoned later and the mandatory retirement age raised to 57. No voice was raised against the management’s callous disregard for the loss and damage caused to at least those who had to retire at 55 and 56 up to then.

3.1.2 Adverse effect

The early retirement scam remained somewhat latent and its impact was not felt so seriously during the first six years of its operations in a scenario of low salaries and low COLA rates. However, it grew in size and intensity with three- to six-fold salary increases during the period 2003-2006.

It amounts to a corrupt practice on the part of the management to take the mean advantage of the compensation package intended for the staff who happen to retire early at 55 on the one hand and also benefit by being able to obtain favoured service extensions entailing larger pensions, larger commuted pension on non-recoverable basis and also COLA at much higher rates.

With the substantial salary increases in 2003 and 2006, the gap between the pre and post 2003 retirees widened exponentially so much so that the pension of a post 2003 retiree in the lowest grade far exceeded that of an Assistant General Manager who retired prior to 2003.

3.1.3 Deterioration of moral values

Given the past experience that the bank employees had to go on a strike for three months for three increments of Rs. 6 in 1972 the ease with which the substantial salary increases were wrested by the corporate and senior management personnel in connivance with the trade unions particularly the CBEU backed by the political power of the day are worth recalling.

(a) The large salary increase across the bank occurred in the guise of equating the insiders’ salaries with that of the “outsiders” who were recruited to the bank’s corporate and senior management positions on contract basis on scales ranging from Rs. 500.000 to 1,500,000, which were justified as the going rates for the similar higher positions in the private sector banks.

(b) The management connived with the trade unions in a bid to “make hay while sun shines” and made a case for their salaries too to be revised saying that such a revision was necessary for maintaining status parallel with the outsiders. Accordingly, the hitherto highest monthly salary of say 50,000 jumped to over Rs. 300,000 while the lowest from 10,000 to 30,000.

(c) The management continued to keep the early retirement scheme operating alongside such large salary increases with the fraudulent intention to drawing larger pensions plus the large commuted pension on a non-recoverable basis.

(d) They also had the benefit of ever increasing Cost of Living Allowance added to their retirement package.

3.1.4 Subversion of the demand for VCOLA

The restoration of VCOLA would have at least relieved the economically disadvantaged sections of the pensioners of their economic difficulties let alone their loss of dignity as seniors in service at different status.

However, the management and the trade unions ganged up together and blocked even the assurances given by several chairmen to restore the VCOLA fearing that it would lead to reversal of the commuted pension from being non-repayable to repayable.

Instead, some small pension increases were given from time to time to appease the pensioners so as to subvert their demand for restoration of VCOLA.

3.1.5 Sabotage of pensioners’ recourse to legal action

All attempts by the pensioners to obtain redress through arbitration process, Human Rights Commissions and the Ombudsman etc. have been subtly sabotaged by the management, thus preventing our recourse to legal remedies.

A serious disadvantage the pensioners face in this regard, is the fact that the affected are aged and cannot await protracted prolonged judicial processes.

We would state the past instances of our experiences in this regard:

(a) Pensioners sought the intervention of the Labour Dept. in the matter and a ruling not amounting to a legal direction by the Commissioner of Labour in favour of the pensioners was rejected by the Bank.

(b) When the pensioners proceeded to refer the matter to a compulsory arbitration under the Industrial Disputes Act, the decision of the Labour Minister to gazette an order of appointing an arbitrator was strongly challenged by the bank.

(c) When the arbitration proceeded as ordered by the Labour Minister, the bank lawyers chose to raise some legal objections regarding the power of jurisdiction, etc. after the trial continued for more than one year.

(d) When the Arbitrator overruled the objections, the bank appealed against his decision and filed action in Appeal Courts making an application to quash the Arbitrator’s order.

(e) As the Arbitrator passed away while the Appeal Court Case was pending, the bank withdrew its case reserving the right to raise the same objections at any subsequent arbitration proceeding.

(f) When another Arbitrator was appointed subsequently the bank objected alleging he is favouring the petitioners and got him removed.

 (g) The next Arbitrator who was appointed for some unknown reason withdrew himself.

The only legal course of action open to the pensioners to obtain redress is thus blocked by the management in an extremely unfair manner, even disregarding the onus of the judicial process, by holding on to “the sword of Damocles” of legal objections in order to prolong matters.

In the light of this situation the Peoples’ Bank Pensioners Association decided to appeal to President Maithripala Sirisena requesting the appointment of an Independent Commission of Inquiry to examine the issue in detail. The association through its district organisations in all parts of the country made representations to the provincial governors seeking their intervention to submit appeals in this regard to the President through the governor’s offices.

Our members numbering over 6,000 and their families who remain grieved for over a decade now are hopeful that the new Government under President Maithripala Sirisena will address the issue urgently and sympathetically.