As Bangladesh is graduating from a least developed country to a developing country, and from a low-income country to a lower middle-income country, it needs to deliver better social welfare to citizens.
The country should design and pursue policies that are proportionate with the growing expectations of its citizens for a more economically secure life, as inequality is also on the rise.
In light of this, the Centre for Policy Dialogue (CPD) on Wednesday suggested introducing a universal pension scheme to reduce inequality in income distribution in the country, while presenting a research paper at a hotel in Dhaka.
"Bangladesh is moving towards becoming a progressive, modern and middle-income country. But, the fact that one-fourth of the total population will remain below the poverty line and elderly people will have no financial security, does not go with this spirit,'' said Debapriya Bhattacharya, distinguished fellow of the CPD.
According to the study, a total 186 out of 192 countries – including Nepal, Bhutan and India in the region – have at least one pension scheme.
Of these, 72 countries have adopted "only contributory'' pension schemes, while 64 countries have a mix of contributory and non-contributory means-tested pension scheme.
CPD Distinguished Fellow Mustafizur Rahman said that the trend of increasing life expectancy, along with the population of elderly people, are expected to raise the dependency ratio in the coming years.
"A forward thinking approach is needed to provide economic security to those people,'' he added.
According to the population monograph for Bangladesh, the number of people over 60 years of age is projected to rise from about 1.26 crore, which was 8 percent of the total population in 2017, to 2.70 crore by 2031.
Furthermore, 20 percent of the population, or 4.30 crore people, will cross the age of 60 by 2051.
However, a universal pension scheme can serve as a foundation for social protection in Bangladesh, in line with the spirit of leaving no one behind of the Sustainable Development Goals.
The CPD study showed that only 7.6 percent of people aged above 65 years of age get pension as they were former government employees. About 39.9 percent of them receive some old age allowance under the social security programmes.
Additionally, 10 percent private sector employees receive some kind of gratuity and provident fund payments.
However, 40 percent of the elderly population (aged 65 plus) do not receive any kind of pension, the CPD study found.
The issue of introducing a universal pension scheme should be seen and examined from the broader perspective of the rising aspirations of citizens, said Mustafizur Rahman.
The seventh five-year plan and the national social security strategy have also suggested for a comprehensive pension system.
Moreover, the idea of a universal pension system for all working population engaged in both formal and informal employment has been articulated in the national budget for the 2019-20 fiscal year.
The government of Bangladesh has also formed a committee in this regard.
CPD suggested following the multi-pillar pension model by the International Labour Organization (ILO) as best practice.
The ILO model is based on four pillars, including social protection, social insurance, complementary pillar and voluntary personal savings.
Under the social protection pillar, a non-contributory pension scheme financed through government budgetary allocations guarantees a minimum income security to all senior citizens in a country beyond a specific age.
The social insurance pillar is a contributory mandatory pension scheme following a defined-benefit pension plan, financed through contribution of employees and employers.
The complementary contributory pension scheme can be either mandatory or voluntary.
Voluntary personal savings is a complementary pension system that represents voluntary private pension scheme for those with the financial capacity to make additional personal savings.
Speaking at the event, former lead economist at World Bank's Dhaka chapter, Zahid Hussain mentioned some challenges to introducing a universal pension scheme.
"Our pension to GDP ratio is greater than the tax to GDP ratio. Without increasing resource mobilization, it would be difficult to continue a universal pension scheme," he explained.
The economist added that there is no country in the world which has a tax to GDP ratio below 10 percent, that has introduced a universal pension scheme.
He also suggested to assess whether the private sector will be able to afford the pension scheme, and recommended reforming the existing pension system.
The CPD said 15 or 20 percent of the average wage, which is Tk13,000, can be provided as retirement allowance or pension.
According to their estimation, benefits of Tk1,853 per month in the 2016-17 fiscal year would have cost 0.5-0.7 percent of the gross domestic product (GDP) and 4.5-7.2 percent of the revenue annually.
They also estimated that additional tax, equivalent to 2-3 percent of the GDP, would have been needed to be mobilised to establish a universal pension system, under the social protection pillar only.
However, Planning Minister MA Mannan said the amount of allowance cannot be made so high that everyone stays at home without working and thus reducing contribution to the economy.