The government plans to make a law to introduce a mandatory pension scheme in the private sector.
The law will be enacted for a comprehensive pension system for the elderly people in the private sector like that in the public sector, reports the Daily Star.
However, the scheme may not see the light of day soon as the law and related regulations will take one to two years to be passed.
It will be a three-tier pension programme. Under tier one—Citizens’ Pension—senior citizens (both men and women) belonging to the poor and vulnerable group will get a certain amount of money from the government every month.
Tire two is meant for employees in formal private sector. Under the scheme, employers and employees will both contribute a certain amount to a fund every month. After retirement, the employees will get the money as monthly pension.
The third tier is meant for both formal and informal private sector. Under this “Private Voluntary Pensions” scheme, any citizen can deposit a certain amount every month or at a regular interval for his or her future benefit.
All the three programmes will be implemented under the National Social Security Strategy of Bangladesh (NSSSB).
The concept paper to be presented in Monday’s cabinet meet was prepared by the General Economics Division (GED) of the Planning Commission.
PRIVATE SECTOR PENSION PROGRAMME
Prof Shamsul Alam, member of the GED, told The Daily Star that the implementation of the programme in the private sector is mandatory as it will be introduced through a law passed by the parliament. The aim of the programme is to provide the employees of the private sector with some amount in the last phase of their life.
According to the strategy, the government will take immediate steps to design a mandatory National Social Insurance Scheme (NSIS) based on the principle of employers and employees jointly paying contribution into a national social insurance fund.
At the start, it will be managed under the newly constituted Insurance Development and Regulatory Authority of Bangladesh (IDRA). After consulting with private business enterprises, the IRDA will send a proposal to the cabinet.
“The pension should be actuarially sound and financed entirely from contributions, with no subsidy from the government,” the strategy document said.
It also said a minimum pension will be established for those who have contributed for at least 10 years, irrespective of the level of their contribution.
This will ensure that the first pensions can be delivered by 2032, a few years after over-60s reach 10 percent of the population.
Asked about the government initiative to introduce pension scheme in the private sector, Kazi Akram Uddin Ahmed, president of the FBCCI, declined to make any comment.
“As I don’t know about the issue, I will not say anything at this moment,” he said.
However, Aftab-ul Islam, president of American Chamber of Commerce (AmCham) in Bangladesh, said, “It is a very good initiative. I hope the private sector will come forward to materialise it.”
The AmCham president said Bangladesh is a poor country and the countrymen fall into a hapless situation at the fag end of their lives. If such a scheme exists, it would be a great help to them.
Under the Citizens’ Pension programme, all the poor people above 60 years of age will receive Tk 800 as pension per month and those above 90 years will get Tk 3,000 from the public coffer.
The implementation of the new programme will start next year and it will be completed in the next three years.
The government will introduce Citizens’ Pension Scheme with its own fund through which all poor and vulnerable citizens will be given allowance.
The pension will be started from next fiscal year and all eligible poor people will be brought under the scheme by FY17-18.
To bring 50 percent of the total eligible people in age group of 60 to 90 years by next fiscal year, the government will require Tk 3,100 crore. In the FY17-18, Tk 6,300 crore will be needed. They will get Tk 800 monthly benefit in the first year and later it will increase in keeping with the inflation.
Those above 90 years of age will be given Tk 3,000 per month. The number of such recipients is around 16,000. To provide pension to 50 percent of these in the next FY, the government will require Tk 30 crore.
Presently, each of the poor women aged above 63 years and men above 65 years get monthly Tk 300 as pension. Some 70 percent of eligible elderly people do not yet get any pension. On the other hand, many below the age of 60 years and also rich people have been enjoying the benefit.
Prof Shamsul Alam said according to study conducted by them, 33 percent of the total beneficiaries of the scheme are below the age of 60 years, and 27 percent are affluent.
He said preparation of a poverty data base was going on and this would be used for providing the benefit. The government’s aim is to check wastage of public fund and bringing all eligible under the benefit scheme.
VOLUNTARY PENSION SCHEME
The government will take another private voluntary pension scheme for the private sector employees who work in the informal sectors.
By December 2015, the Bank and Financial Institutions Division of the finance ministry will conduct a study on how the voluntary pension system can be introduced in the informal sector.
The document said, “The study will examine the viability of establishing a Pension Regulatory Authority that will be responsible for supervising private pensions, thereby ensuing their integrity, fairness and financial sustainability.”