Longer life expectancy, coupled with the gradual disappearance of the extended family system, makes it imperative for Bangladesh to design a robust pension system to avoid impoverishment in old age and accompanying social distress, says a survey.
According to paper presented at a webinar Thursday, timely and smart policy interventions can help avert an impending pension crisis in the future.
The paper, presented by World Bank Lead Governance Specialist- Financial Management Suraiya Zannath Khan says a fully funded pension system should be introduced with options of investment in stocks or bonds.
She also recommended forming a pension-management and-advisory body (or assign to investment bank) to oversee universal pension system, formal or informally.
She presented the keynote paper at a virtual webinar on "Universal Pension System in Bangladesh- A Path Breaking Intervention" organised by the Institute of Chartered Accountants of Bangladesh (ICAB).
Finance Division Senior Secretary of the Ministry of Finance Abdur Rouf Talukder attended the webinar as the chief guest while Chairman, Bangladesh Energy and Power Research Council, Satyajit Karmaker, Finance Division Additional Secretary (Regulation) Md. Golam Mostafa, attended as special guests.
She said in FY 2019-20 budget speech the Finance Minister had announced an 'Introduction of Universal Pension Scheme' with the rationale to provide wider coverage.
According to the budget speech in FY 2019-20, "since the government pensioners are only a small fraction of the total population, a wider coverage is envisaged by the government. It was also suggested the formation of an Authority for gradual introduction of the universal pension for everyone, including all employed in formal and informal sectors of the economy".
Universal pension is a stream of payments from state to an individual that starts when someone retires and continues in payment until he or she dies.
The universal pension is different from other types of pensions since its eligibility criteria do not require former contributions of an individual, but his citizenship or residency and age or other criteria are set by government.
At present, there is no formal pension system in Bangladesh at a national scale, except government service, civil and military.
The numbers of government employees are around 1.4 million, which accounts for only 5 per cent of the total employed both in private and government organisations.
All the government employees are entitled to post-retirement pension as per the Pension Act of 1871.
Further Simplification of Pension Rules and Procedures in respect of Sanction and Payment of Pension to Civil Employees of Government had been made in January 27, 2009.
It expanded the coverage of the government employees' pension scheme and mapped out budgeting and administrative arrangements-according to the paper presented in the webinar.
Speaking at the event, Finance Division Senior Secretary Abdur Rouf Talukder said a modern and efficient pension administration and management system directly contributes to improved services to civil servants.
"As pension constitutes a considerable size of public expenditure, a well-administered pension system also contributes to efficient fiscal management and reduces the risk of system loss, he said adding that in addition, civil servants become the direct beneficiary of reforms that have been implemented over the decades in the area of PFM system and institutions.
The Senior Secretary also said, the government remains committed to modernize the pension payroll and administration as part of its commitment to achieve good governance and efficient service delivery in all areas. Upon analysis and survey on the need to modernize the administration of civil service pensions, the Finance Division of the MOF' has taken initiative to integrate payroll and personnel records, he added.
ICAB President Mahmudul Hasan Khusru said Bangladesh's dual graduation journey from a least developed country to a developing country, and from a low-income country to a lower-middle income country, entails a need to design and pursue policies that are commensurate with the growing expectations of its citizens for better social welfare and a more economically secured life.
During this pandemic the inequality between rich and poor has risen and created yeaning gap as the middle-income group people turned poor losing their jobs. Inequality in Bangladesh is a cause of serious concern, a Universal Pension System could serve as a tool to reduce this inequality in income distribution, he suggested.
UPS as a foundation of social protection in Bangladesh is commensurate with the spirit of the SDGs and the SDG aspiration of 'leave no one behind' and fulfill the SDG criteria, he added.
World Bank Lead Governance Specialist and the keynote presenter Suraiya Zannath Khan also said Bangladesh follows the traditional pay-as-you-go (PAYG) pension scheme, which is an unfunded and noncontributory, financed from the GoB's recurrent non-development budget.
She said the pension budget is formulated based on estimates of retirees and their benefits adjusted for inflation.
Pension expenditure is allocated in operating budget, and committed pension liabilities are a mandatory payable obligation of the government. Pension expenditure constituted 6.5 per cent of current expenditure in FY16 and continues to grow. Pension expenditure rose from Tk. 106.3 billion in FY16 to Tk. 126.7 billion in FY17, and the allocation increased further to Tk. 229.4 billion in the FY18 budget, or 9.8 percent of current expenditure, she said in her paper.
The keynote paper presenter also described that the public expenditure and financial accountability (PEFA) Report 2015 points to weak controls over the current stock of civil servants pension system and a WB policy note on Bangladesh's civil service pension administration system proposed four priority actions to ensure smooth payment of pension whish are ; strengthening administrative arrangements by establishing a Central Pension Cell, simplified processes accounting and payment system, clear the backlog of pension cases., expand payment options, and automation and increased responsiveness through Grievance redressal system.
Checks and balances in the system need strengthening by separating the functions of pension case preparation and issuance of PPOs for pension payment, she said, adding that government has established full-fledged centralized pension roll with EFT payment capability and itis now operational since 2019.
As panel speakers government's Universal Pension Reform International expert and consultant, Dr. Kavim V Bhatnagar, and Policy Research Institute of Bangladesh Executive Director,. Ahsan H. Mansur participated in the webinar,
ICAB President Mahmudul Hasan Khusru FCA delivered address of welcome while World Bank Lead Governance Specialist- Financial Management, Suraiya Zannath Khan FCA, presented the keynote paper.
ICAB Council Member and Past President Dewan Nurul Islam FCA presided over the webinar as the session chairman. ICAB CEO Shubhashish Bose delivered an introductory speech and Vice President Maria Howlader FCA made concluding remarks.
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