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Characteristics of statutory provident funds
4.
A number of developing countries in Asia, Africa and the Caribbean operate statutory provident funds. The majority of these countries were previously under British administration, but other countries, such as Nepal and Chile, also operate funds of this kind. Provident funds are essentially a form of compulsory savings scheme. Each member has his own account into which contributions are paid and upon which interest is earned. The balance is normally payable, in a lump sum, to a member when he reaches a specified age (normally 55) or can no longer work because of ill health or injury, and to his designated dependants in the event of his death. It is also generally payable to
a member who emigrates permanently, and in some systems full or partial withdrawal of contributions is permitted in the event of a member's unemployment or for certain specified purposes such as home-purchase, medical treatment or children's education or marriage expenses.
5.
Contributions to statutory provident funds are made by both employees and employers. The total contribution is generally a percentage of the employee's wages, either with the amount shared equally or with the employer paying the larger portion. Contributions are normally made monthly and in some schemes there is a ceiling on the amount of an employee's earnings subject to contribution. The rate of contribution to statutory provident funds in the Asia/Pacific region ranges from 3% of wages in the case of Indonesia to 35% of wages (50% prior to 1 April 1986) in the case of Singapore, with the norm being between 10% and 20% (Fiji, India, Kiribati, Papua New Guinea, Solomon Islands, Western Samoa, Malaysia, Nepal, and Sri Lanka). Contributions to the Singapore Central Provident Fund are exceptionally high because in addition to the traditional protection provided by a statutory provident fund the scheme is also designed to assist with home purchase, and this element in the scheme accounts for the larger part of a member's contribution to the CPF.
6.
Membership of statutory
provident funds is compulsory for most persons in wage and salaried employment. In countries where government employees have other protection they are normally excluded from the fund's coverage, as
in order to avoid administrative complexity
are casual workers and workers in small establishments. In some schemes self-employed workers may participate on a voluntary basis.
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