The finance minister has announced that the government will be adopting a public pension plan similar to developed countries during his 2017 – 2018 fiscal year budget speech.
An outline of the public pension plan will be provided in the 2018 – 2019 fiscal year budget.
The related departments of the finance ministry are working on this matter.
AMA Muhith said: “Government pensioners occupy a mere fraction of the entire population. So we want to ensure that besides the public employees, everyone else can enjoy the public pension fund. Our primary goal is to transform Bangladesh into a welfare state.”
There will be an instruction accompanying the new fiscal year budget which will outline the public pension plan.
The pension plan will be applicable to only those who will be employed after implementation, not the ones who are currently employed in government jobs, finance ministry sources informed.
The sources also said that a proposal is underway to include employees working in private corporate firms or in companies involved with the share market in the public pension plan. Consequently, other types of businesses will also be included under the plan.
How the public pension fund will operate
Both employers and employees will be contributing to the pension funds. It can be that 10% of an employee's salary will be going to the fund. Employers will also contribute similar percentage of money.
The fund needs to be managed by experienced people. An institution should be built for Universal Pension Systems.
A regulatory authority is needed to monitor the formal and informal pensions, and which will be handling how the pension operates.
Sources notified that under the proposed pension scheme, the retirement age of public employees is 60 years, while it is 68 years for those working in private jobs.
After retiring, one can withdraw half of the cash in one go in a specified time, but the rest will remain in the fund and can be withdrawn in installments in each forthcoming month.
Funds will be monitored by a separate regulatory authority that will invest the funds where returns are high and will also be given investment security. Some portion of the returns from the investment will be enjoyed by the stakeholders every month.
The stakeholders of the funds will be given smart cards. The proposed pension scheme will enjoy 5 – 10% yearly increments.
Dr AB Mirza Azizul Islam, former finance adviser of caretaker government said: “We believe that adopting this pension system will be highly beneficial for all but affiliating with private companies for this could be a challenge.”
There can be multiple sources of this fund. The primary source will be a portion of the civic servants' income tax. For example, 2 – 3% of the income tax money of regular taxpayers will go into the pension fund.
The second source will consist of money from the budget that will be allocated specifically for the pension fund.
The third source will be the contribution of the employers and employees and their institutions.
At present, there are around 1.4 million public employees, which is only 5% of the employed population, who are enjoying the pension benefits.
On the other hand, only 8% out of the 95% of the private sector employees are officially involved in the formal sector. They are however, deprived of the pension benefits.
This article was first published on banglatribune.com