After paying a certain amount in the form of deposits for 10 consecutive years under the universal pension scheme, from the age of 60 people will receive a pension on the accumulated deposits. The spouse of an eligible retiree will receive a pension benefit if the retiree dies at age 75.
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The government has published the National Pensions Authority Bill 2022 and proposed a self-contributory pension scheme for citizens aged between 18 and 50 with a National Identity Card (NID) and living in their country or abroad. After paying a certain amount in the form of deposits for 10 consecutive years under the universal pension scheme, from the age of 60 people will receive a pension on the accumulated deposits. The spouse of an eligible retiree will receive a retirement benefit if the retiree dies at age 75. If a pension plan holder dies before they have paid the contribution for at least 10 years, they will receive their deposited money with interest.
According to the bill, no one will be able to withdraw the money they have deposited under the program, but will be able to withdraw 50% of the loan on the deposit and the repayment of the loans will be deposited in the pensioner’s account.
Bangladesh already has pension schemes for personnel in civil, military and self-governing bodies. The Provident Fund Act 1925 relates to the pension of government employees. The Act contains certain rules such as the General Provident Funds Rules 1979 and the Contributory Provident Funds Rules 1979, the Benevolent Funds Rules 1982 and the Group Insurance of Government Employees and Autonomous Bodies , the Financial Institutions Act 1993 (for employees of governments and self-governing bodies, including nationalized banks). The proposed scheme excludes employees of governmental, semi-governmental and self-governing organizations from the scheme until the pension authority i.e. the government publishes a gazette in this regard.
In line with common practice, there are three pillars in pension scheme practices in different countries: (1) Non-contributory (basic pension) (2) Contributory (forced savings) (3) Contributory (voluntary savings). Bangladesh already has non-contributory basic pensions for civilian and military personnel and the proposed scheme is a voluntary, self-contributory (but not forced savings) scheme for ordinary citizens.
The first pillar is a non-contributory anti-poverty pillar that guarantees a minimum income in old age. The second pillar is a forced savings pillar that provides benefits only to contributors and generally provides the most benefits to those who contribute the most. The two compulsory pillars only differ in that the benefits are flat-rate or linked in some way to contributions. The third pillar is a voluntary savings pillar, available to anyone wishing to supplement the retirement income provided by the first two pillars.
The first pillar protects the elderly from absolute poverty and the last two pillars protect them from relative poverty who can contribute at working age but need assistance in old age. The primary proposal is somewhat similar to the second pillar except that participation is voluntary. Bangladesh could consider introducing the three pillars into the pension system in due course.
Regarding management, the authority of the scheme will remain entirely under the control of the government and not an independent authority and audited by the Comptroller of the Auditor General of Bangladesh (AAG). There is a possibility of corruption and mismanagement within the authority. The account must be audited by an independent auditor and not by the CAG. It should be an independent authority/trust that is independent of government control for effective performance.
According to the proposed law, under article 11 (ga), employees of the government and self-governing bodies will remain outside this scheme since they already receive the benefits. There is no clear indication whether the government has a plan to unify all pension schemes into one law: to unify the Provident Funds Act 1925 and the National Pensions Authority Bill 2022 for certain schemes universal pension schemes (such as 3-pillar schemes) for all citizens. whatever the job. This will be a welcome move for a fair distribution of benefits to all citizens regardless of their profession to make Bangladesh a true welfare state.
The author is a legal economist.