The government is finally going to introduce the much-anticipated pension scheme in the private sector from the fiscal 2022-23 after eight years since the welfare initiative came into discussion to ensure financial security for all classes of senior citizens.
Citizens aged between 18 and 60 will be able to enrol in the scheme and pay a fixed monthly fee, as low as Tk100, to the pension fund. The fee can be paid through all online methods, such as mobile financial services and agent banking.
An aspirant pensioner will have to continue regular payments to the fund for at least 10 years after signing up. However, the enrolment in the private sector pension will not be made mandatory, according to a strategy paper on the formulation of a universal pension scheme presented to Prime Minister Sheikh Hasina on Thursday.
Alongside a one-time payment, a senior citizen, after his retirement at 60, will get a pension per month as per his contribution to the fund in their entire lifespan. If an enrolled pensioner dies, their family members will get pension benefits.
The government will invest the money deposited to the pension fund in treasury bills, bonds and profit-making infrastructure development projects, which will reduce dependence on bank borrowing.
The returns from such investments will be added to the fund. Besides, the government will also contribute to private sector pensions though the percentage has not been determined yet.
Once the pension scheme comes into effect, the government will cut down on its allocation on several social safety programmes, such as old-age allowance, and transfer the amount slashed to the pension fund.
After the universal pension system is in full swing, it will also be extended to those employed in government services. The finance ministry hopes that the pension programme will be fully implemented by 2025.
Those who are currently in government services and those who will join the services before the introduction of the universal pension, will get pensions from the government as before.
The government will decide a timeline from which year the scheme will be effective for those entering government services.
For government employees, the maximum monthly gross pension has more than doubled over the past one decade. On top of this, a 5% increment is being added every year.
Following the death of pensioners and family pensioners, their minor children, unmarried daughters and children with disabilities are getting lifelong pension benefits.
But there are no institutional financial benefits for private sector employees and for their children after their retirement from jobs.
According to the latest Labour Force Survey, the number of employees in the private sector currently stands at 5.85 crore, while the number is 22.89 lakh in the public sector.
Even though a few of those who do formal jobs in the private sector get contributory provident fund and gratuity benefits, those working in the informal sector do not get any retirement benefits.
After 2040, when the current demographic dividend will be over, the number of such elderly people will increase several times.
Bangladesh is still a young country according to the age structure, but it is ageing fast and poised to enter the official stage of an ageing nation by 2030.
According to the eighth Five Year Plan, the number of people aged 60 and above may reach over 40 million in 2050 from only 10 million in 2020. Thus, each of the next three decades may be associated with 10 million additional elderly citizens.
Senior Finance Secretary Abdur Rauf Talukder placed the strategy paper before the prime minister on Thursday. Finance Minister AHM Mustafa Kamal, Planning Minister MA Mannan, PM's Principal Secretary Ahmad Kaikaus and other high officials were also present on the occasion.
In the strategy paper, the Finance Division has highlighted the introduction of the universal pension scheme with three main goals.
They are ensuring the financial security of the working population in old age and thereby keeping their standard of living above the poverty line; increasing the low-income population's savings tendency and ensuring their welfare by bringing them under a sustainable and well-organised social protection zone; and encouraging capital accumulation by consolidating small savings and contributing to the country's economic development by converting it into investment.
According to a press release issued by the finance ministry, the strategy paper has been formulated in the light of the PM's promise to the citizens of the country in her government's election manifesto of introducing a universal pension system.
The prime minister already directed the Finance Division to take initiative for enactment of a law on an emergency basis to form a universal pension authority, which will work on introducing formal pension benefits for everyone.
According to officials at the Finance Division, as per the strategy paper, the universal pension scheme was supposed to be introduced from FY24, but the Prime Minister's Office directed making it effective from the next fiscal year.
For this, the finance ministry will complete all work on enacting a law and related regulations within the current fiscal year, they noted.
The pension authority will be a completely IT-based institution and will manage the scheme. The PMO will officially announce the pension scheme once the strategy paper is finalised as per the prime minister's instructions.
Seeking anonymity, a Finance Division official told The Business Standard that everyone must use a national identity card to be included in the universal pension programme.
How universal pension scheme made the rounds
In April 2014, the then finance minister Abul Maal Abdul Muhith spoke of introducing a pension system in the private sector for the first time during a pre-budget meeting with representatives of non-government organisations.
In his budget speech in June that year, he made an announcement in this regard and asked the Financial Institutions Division to finalise the pension scheme.
He reaffirmed his commitment in the following years and announced the launch of a pilot project to introduce a pension scheme for the employees of private banks and corporate organisations in 2018. He also announced introducing a universal pension system from 2021.
But after the first announcement, two years passed because of a dispute over which department of the finance ministry would run the pension programme.
Over the next two years, a team led by an additional secretary of the Finance Division toured various provinces of India and gave a presentation in 2016 on how to launch the programme.
The initiative came to a halt when the head of the team, former additional secretary ARM Nazmus Sakib, was transferred to the Office of the Chief Controller of Imports and Exports in 2017. He went on pre retirement leave (PRL) in 2019.
In 2020, an initiative was taken to prepare the concept paper by employing Nazmus Sakib on an outsourcing arrangement, but that did not happen due to the outbreak of the novel coronavirus.
Pointing out that introducing a pension system for the massive workforce of around six crore is a daunting task, the officials at that time said a lot of preparation, including building institutional and technical infrastructure, hiring foreign consultants, had to be done to start work on it.