Tuesday, 3 October, 2023

Pilot universal pension scheme from July

Pilot universal pension scheme from July

The government is planning to initiate a universal pension scheme, set to begin on an experimental basis from July 1 this year.

Finance Minister AHM Mustafa Kamal will officially announce this development and present a comprehensive action plan during FY24’s national budget presentation in parliament this Thursday. 

Initially, the scheme will be rolled out in Dhaka and one other district chosen to serve as pilot regions. Depending on the success of the scheme over an experimental period of one to two years, it could be expanded across the nation.

The scheme's initial reach will be small and optional for a period of five years, with plans to make it mandatory by 2028.

Earlier this year, on February 13, the finance ministry established the foundation for the Universal Pension Authority. The chairman and members of this authority are scheduled for appointment next month.

Preliminary decisions propose that the authority's office be situated within the finance ministry. The draft rules for the related law are also in their final stages of preparation.

The finance ministry has developed six types of products for the universal pension scheme, categorized under six segments to cover approximately 100 million citizens between 18 to 50 years old.

These segments include private institution pensioners, non-resident pensioners, laborers, individuals in the informal sector, people under social security schemes, and students.

Each scheme will operate separately with a minimum subscription rate set for each segment. Subscribers can choose to deposit more, with increased pension benefits correlating to the amount of subscription.

The Universal Pension Management Law 2023, which was passed in the national parliament on January 24, states that citizens aged 18 to 50 are eligible for the pension scheme. Provision exists for including individuals over 50 on special considerations.

To qualify for the pension, a person must pay a subscription for a minimum of 10 years. After this period, they will become eligible for a government pension until their death. Subscribers who reach the age of 60 will receive pension benefits proportional to their cumulative deposits and profits. Non-Resident Bangladeshis can also participate in the scheme. In cases where subscribers die before completing 10 years of subscription, their deposited funds will be returned to a nominated beneficiary.

In line with the law, the government may subsidize part of the subscription fee for insolvent subscribers within the lowest income bracket. Government, semi-government, autonomous, or private institutions can also participate in the pension scheme, with the subscription amount fixed by the authority.

However, employees of these institutions are exempt from the scheme until the government decides otherwise.

Despite the scheme's progress, there are still many details to be confirmed. Dr. Ahsan H Mansur, Executive Director at the Policy Research Institute, stated, "None has been appointed in the newly formed authority for the pension scheme. Even the amount of subscription or how much will be the government's contribution has not been specified."

The late Finance Minister AMA Muhith initially proposed the universal pension scheme in the 2017-18 fiscal year budget. Current Finance Minister Kamal has vowed to implement the plan during this fiscal year, following through on this commitment.