The element of uncertainty over its execution notwithstanding, the government's move to introduce the 'universal pension system' covering both private and public sectors is certainly a positive one.
Finance Minister AMA Muhith, according to a report published in this paper, is expected to present an outline of the proposed pension system in his upcoming budget speech.
The finance ministry has a plan to launch a pilot scheme, initially focusing on three population groups - low-income savers, voluntary savers and private sector employees.
The government, reportedly, will start with the private sector employees. The garment sector workers may also be covered.
How the government plans to go ahead with the overall pension programme is still not known. But, it surely will be a tough job in a country where most private sector employees get virtually nothing while leaving their respective places of work or when going on retirement.
Some employees and workers do get provident fund money. However, only a few organizations are found to be operating contributory provident fund schemes despite the fact that extending such facilities to the employees has been made mandatory in the labour law.
The payment of gratuities to an employee for the period of his/her services in any organization is also mandatory. But only a few organizations make such payments.
In the case of pension schemes for private sector employees, the employers will have to make contributions to the pension funds matching the contributions of their employees, which would be managed and overseen by a number of entities - pension enrolment office, pension trust, custodian, central record-keeping agency, trustee bank, pension fund managers and annuity service providers.
It is understood that the private sector employers will not be in control of the proposed pension funds created for their employees.
A new pension office will also be set up along with a pension cell in the finance ministry to draft a law that would cover all aspects of the universal pension scheme.
In the case of low-income savers and voluntary savers, the government might extend contributions equivalent to 20-25 per cent of the contributions to be made by each of the beneficiaries.
Being interested in the scheme, the World Bank (WB) had reportedly pledged to provide both technical and financial assistance worth US$ 100 million. But because of the delay in launching the fund, major part of the fund has been diverted to the development of insurance sector.
Given the attitude of the private sector employers towards the welfare of their workers, the implementation of the scheme may face many hurdles. However, if the government is truly serious and relevant agencies are adequately alert, the scheme may prove to be a success.
But why should the scheme be designed only for the private sector people? It should also include the government employees. The huge amount the government pays every year as pension benefits is a big burden for the taxpayers. To lessen the taxpayers' burden, the pensions for the public servants also need to be made contributory.
The amount spent from the public exchequer during the fiscal year 2017 on pension payments was equivalent to 8.0 per cent of the government's revenue budget, and 0.75 per cent of gross domestic product (GDP). Neighbouring India has introduced contributory National Pension Scheme (NPS) for both private and public employees. The NPS does not guarantee any assured amount of pension despite their regular contribution to the pension fund. All the benefits come from the investments made by the pension fund in the market.
However, the way the government has been pampering the public servants with pay hikes and different types of allowances, it is unlikely to accept any suggestion that curtails the benefits, both due and undue, given to the public servants.
